The role of financial statement analysis in valuing companies using P/E multiplier

Abstract

Participants in investment activities are challenged because they have to make decisions in a dynamic environment, which means that the decisions about the price of the transaction, the amount of investment, the intrinsic value of acquired or sold company, risks taken, must be made in the short term. All these decisions stem from processes that rely on prices that are valid on the market, on the one hand, and valuation models, which aim to determine the intrinsic value of the enterprise, on the other. The analysis of financial statements is an integral part of all traditional valuation models, while its role in the application of multiplier market models is not significant. The aim of the paper is to examine the role and the contribution of the traditional financial analysis in the processes of valuation of enterprises with P/E multiplier.

Keywords

• financial analysis
• growth and risk
• p/e multiplier