An Empirical Research on Fu-Wang Foods Ltd: Industry, Strategy, Accounting, Ratio, Valuation and Proforma Analysis

  • K.M. Anwarul Islam Associate Professor,Department of Business Administration, The Millennium University, Dhaka, Bangladesh
Keywords: Fu-Wang Foods Ltd, Industry, Strategy, Accounting, Ratio, Valuation, Proforma Analysis

Abstract

In this study an attempt was made to prepare the research on Fu-Wang Foods Ltd. We have also analyzed the strategies, accounting policies and ratios. Historical and Proforma income statements, balance sheet and cash flow statement have been made. We have also determined, loosely speaking, the intrinsic value of stocks of firm. The company is in food processing industry. The position of Fu-Wang is good in this industry. Its long term profitability and sustainability is also secured. The accounting policies and estimates of Fu-Wang as well as the food industry are flexible enough. Management enjoys moderate discretionary powers. Analysis of the various ratios over the five years reveals that many of them are satisfactory and some are not. By doing the valuation of the company with some assumption we found the intrinsic value of the firm is approximately 36 tk. Sensitivity of stock price by changing the discount rate and sales growth rate has also been examined. By projecting the historical accounting figures we have also prepared Proforma income statements, balance sheets and cash flow statements and found that the future of Fu-Wang Foods ltd. is rather satisfactory, given some assumptions.

References

Baker, M., and J. Wurgler. (2007). Investor Sentiment in the Stock Market. Journal of Economic Perspectives, 21, 129-151.
Bhattacharya, N.; E. Black; T. Christensen; and C. Larson.(2003).Assessing the Relative Informativeness and Permanence of Pro Forma Earnings and Gaap Operating Earnings. Journal of Accounting and Economics, 36 ,285-319.
Bowen, R.; A. Davis; and D. Matsumoto. (2005). Emphasis on Pro Forma versus Gaap Earnings in Quarterly Press Releases: Determinants, Sec Intervention, and Market Reactions.The Accounting Review, 80, 1011-1039.
Brown, N.; T. Christensen; and W. Elliott. (2011).The Timing of Quarterly Pro Forma Earnings Announcements. Journal of Business, Finance and Accounting Forthcoming.
Baker, M., and J. Wurgler. (2007). Investor Sentiment in the Stock Market. Journal of Economic Perspectives 21,129-151.
Bhattacharya, N.; E. Black; T. Christensen; and R. Mergenthaler. (2007). Who Trades On Proforma Earnings Information?. The Accounting Review, 82,581-619.
Bradshaw, M., and R. Sloan. (2003). Gaap versus the Street: An Empirical Assessment of Two Alternative Definitions of Earnings.Journal of Accounting Research. 30, 41-66.
Bhattacharya, N.; E. Black; T. Christensen; and R. Mergenthaler. (2004). Empirical Evidence on Trends in Pro Forma Reporting. Accounting Horizons, 18, 27-43.
Brown, N. C., Christensen, T. E., Elliott, W. B., & Mergenthaler, R. D. (2012). Investor Sentiment and Pro Forma Earnings Disclosures. Journal of Accounting Research, 50(1), 1-40.
Dyck, A., and L. Zingales. (2003). The Media and Asset Prices:Working Paper, University Of Chicago.
Doyle, J.; R. Lundholm; and M. Soliman. (2003).The Predictive Value of Expenses Excluded from Proforma Earnings. Review of Accounting Studies ,8,145-174.
D’avolio, G.; E. Gildor; and A. Shleifer. (2002).Technology, Information Production, and Market Efficiency.In Economic Policy for The Information Economy: A Symposium Sponsored by the Federal Reserve Bank of Kansas City. Kansas City, Mo.
Elliott, W. (2006). Are Investors Influenced By Pro Forma Emphasis and Reconciliations in Earnings Announcements?. The Accounting Review, 81,113-133.
Frankel, R.; S. Mcvay; and M. Soliman. (2010). Non-Gaap Earnings and Board Independence. Review of Accounting Studies Forthcoming.
Frederickson, J., and J. Miller. (2004).The Effects of Pro Forma Earnings Disclosures on Analysts’ and Nonprofessional Investors Equity Valuation Judgments. The Accounting Review ,79 ,667-686.
Graham, J.; C. Harvey; and S. Rajgopal. (2005).The Economic Implications of Corporate Financial Reporting. Journal of Accounting and Economics ,40, 3-73.
Henry, D. (2001).The Numbers Game: Companies Use Every Trick to Pump Earnings and Fool Investors - The Latest Abuse: Pro Forma Reporting.Business Week .
Kumar, A., and C. Lee. (2006). Retail Investor Sentiment and Return Comovements. Journal of Finance, 61, 2451-2486.
Lev, B., and S. R. Thiagarajan. (1993). Fundamental Information Analysis. Journal of Accounting Research 31,190–215.
Lougee, B., and C. Marquardt. (2004). Earnings Informativeness and Strategic Disclosure: An Empirical Examination of Pro Forma’ Earnings. The Accounting Review, 79,769-795.
Ou, J. A., and S. H. Penman. (1989). Financial Statement Analysis and the Prediction of Stock Returns.Journal of Accounting and Economics ,11, 295–329.
Published
2017-07-22
How to Cite
Islam, K. A. (2017). An Empirical Research on Fu-Wang Foods Ltd: Industry, Strategy, Accounting, Ratio, Valuation and Proforma Analysis. American Finance & Banking Review, 1(1), 1-11. https://doi.org/10.46281/amfbr.v1i1.79
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper