Question

Explain why an analyst should reformulate a firm’s financial statements before performing a valuation of the firm.

Answer 1

Answer)

The analyst must reformulate a firm's financial statements before performing a valuation of the firm because it enables him to verify whether the financial statements are reported as per standards and procedures which are acceptable in that particular country (say GAAP in USA) and also to verify that every number that appear in the financial statements have been primarily recorded in books of accounts and properly supported by source documents and along with it to ensure that no figures from books of accounts is omitted while preparing financial statements as they may have significant effect on determining the value of firm.