Question

Your accounting teacher has been talking about how important accounting numbers are in valuing a firm, and yet many of the people you know who invest are always talking about growth as the important measure. Who is right?

Answer 1

Well both are right, the growth depends on the accounting figures and the accounting figures depends on the growth.

Yup, what is this. Yes, you heard right.

The accounting figures are the base to decide on the growth of the firm and the growth will lead to increase in the accounting figures. So accounting figures and growth both are equally important in valuing a firm. The growth tells you about the virtual potential of firm whereas the accounting figures puts it in the paper.