
Using the Statements to Measure Financial Health
41
a unique technology, for instance, an acquirer that
wants that technology for its operations may be will-
ing to pay a premium for the business.
Valuation also refers to the process by which Wall
Street investors and stock analysts determine what a
publicly traded company “ought” to be selling for (in
their view). That helps them decide whether the cur-
rent market price of the stock is a good deal or a bad
ANALYZING FINANCIAL STATEMENTS
• Compare numbers with what’s typical in a given
industry.
• Compare statements of similar-sized
companies.
• Watch for trends: How have the statements
changed ...