Chapter 11
Valuing Common Stock
Adair | Nofsinger, Foundations of Investments, 1 st Edition. © 2024 Cengage. All Rights Reserved. May not be scanne
copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter Objectives, 1 of 2
By the end of this chapter, you should be able to:
• LO 11-1 Describe the corporate form of business from a stockhold
rights perspective.
• LO 11-2 Explain the different types of dividend payments (includin
cash, stock, and stock splits) as well as share repurchases.
• LO 11-3 Know the definition and purpose of the liquidity ratio, act
ratio, profitability ratio, leverage ratio, and coverage ratio.
• LO 11-4 Understand the dynamics of the statement of cash flows
Adair | Nofsinger, Foundations of Investments, 1 st Edition. © 2024 Cengage. All Rights Reserved. May not be scanne
copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter Objectives, 2 of 2
• LO 11-5 Use the constant growth rate model and PE model to
estimate prices.
• LO 11-6 Calculate value using the dividend discount model.
• LO 11-7 Distinguish between buy-side and sell-side analysts.
• LO 11-8 Explain how to use the PE ratio, PS ratio, and PB ratio to
assess a firm’s relative value.
• LO 11-9 Use the PEG ratio to assess a firm’s relative value.
• LO 11-10 Distinguish between the value and growth investment
strategies.
Adair | Nofsinger, Foundations of Investments, 1 st Edition. © 2024 Cengage. All Rights Reserved. May not be scanne
copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Outline of Chapter
Valuation of bonds is based on discounting known future cash flows
Stocks do not have known future cash flows, making valuation more
challenging. Three primary methods are used:
Analysis of financial statements
Discounted cash flows
Price ratios
Each are discussed throughout this chapter.
Adair | Nofsinger, Foundations of Investments, 1 st Edition. © 2024 Cengage. All Rights Reserved. May not be scanne
copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Valuing Common Stock
Adair | Nofsinger, Foundations of Investments, 1 st Edition. © 2024 Cengage. All Rights Reserved. May not be scanne
copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter Objectives, 1 of 2
By the end of this chapter, you should be able to:
• LO 11-1 Describe the corporate form of business from a stockhold
rights perspective.
• LO 11-2 Explain the different types of dividend payments (includin
cash, stock, and stock splits) as well as share repurchases.
• LO 11-3 Know the definition and purpose of the liquidity ratio, act
ratio, profitability ratio, leverage ratio, and coverage ratio.
• LO 11-4 Understand the dynamics of the statement of cash flows
Adair | Nofsinger, Foundations of Investments, 1 st Edition. © 2024 Cengage. All Rights Reserved. May not be scanne
copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter Objectives, 2 of 2
• LO 11-5 Use the constant growth rate model and PE model to
estimate prices.
• LO 11-6 Calculate value using the dividend discount model.
• LO 11-7 Distinguish between buy-side and sell-side analysts.
• LO 11-8 Explain how to use the PE ratio, PS ratio, and PB ratio to
assess a firm’s relative value.
• LO 11-9 Use the PEG ratio to assess a firm’s relative value.
• LO 11-10 Distinguish between the value and growth investment
strategies.
Adair | Nofsinger, Foundations of Investments, 1 st Edition. © 2024 Cengage. All Rights Reserved. May not be scanne
copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Outline of Chapter
Valuation of bonds is based on discounting known future cash flows
Stocks do not have known future cash flows, making valuation more
challenging. Three primary methods are used:
Analysis of financial statements
Discounted cash flows
Price ratios
Each are discussed throughout this chapter.
Adair | Nofsinger, Foundations of Investments, 1 st Edition. © 2024 Cengage. All Rights Reserved. May not be scanne
copied or duplicated, or posted to a publicly accessible website, in whole or in part.
