Stephen Penman's Approach in Analyzing Financial Statements

• In Event: Reception with ELS posters

Abstract

Teaching students the Penman’s approach in analyzing financial statement achieves the following: 1. The process of articulating the information across the financial statement would be much easier, specifically with ratio analysis. 2. Helps the students understand how to account for the hidden losses from several transactions as is the case with stock based compensation. 3. Maintaining a clean surplus relation makes applying earnings-based valuation models e.g. the residual earnings model flow through smoothly and consistently with the reformulated statements.

Author

• Adel N Ibrahim, University of Illinois-Urbana-Champaign