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Putting Ratios into a Firm Value Context for Entrepreneurs and Entrepreneurship Students

Author

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  • Tom Arnold

    (University of Richmond)

Abstract

Ratio analysis is generally presented as something that has to be calculated after completing other financial statements and is generally viewed, particularly by students, as busy-work with little value. This paper changes the context of ratio analysis in order to demonstrate how a focus on the information provided by ratios adds to the value of the firm. By dissecting the valuation of a publicly traded firm using a price to earnings ratio multiplier, value generating factors in the form of ratios, can be inferred for smaller non-publicly traded ventures.

Suggested Citation

  • Tom Arnold, 2011. "Putting Ratios into a Firm Value Context for Entrepreneurs and Entrepreneurship Students," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 15(2), pages 23-28, Winter.
    • Handle: RePEc:pep:journl:v:15:y:2011:i:2:p:23-28
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    More about this item

    Keywords

    Ratio Analysis; Valuation;

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • A23 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Graduate
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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