This book discusses a series of techniques in financial statement analysis such as (1) Business strategy analysis for developing an understanding of a firm's competitive strategy (2) Accounting analysis for representing the firm's business economics and strategy in its financial statements and for developing adjusted accounting measures of performance (3) Financial analysis for ratio analysis and cash flow measures of operating, financing, and investing performance, and (4) Prospective analysis for developing forecasted financial statements and for estimating firm value. Applications to equity security analysis, credit analysis, mergers, financing, and management communications are also included.

Krishna G. Palepu is the Ross Graham Walker Professor of Business Administration and Senior Associate Dean for International Development at the Harvard Business School, Harvard University. Prior to assuming his current administrative position, Professor Palepu held other positions at the school, including Senior Associate Dean, Director of Research, and Chair, Accounting and Control Unit.

Professor Palepu's current research and teaching activities focus on strategy and governance. In the area of strategy, his recent focus has been on the globalization of emerging markets. In the area of corporate governance, Professor Palepu's work focuses on how to make corporate boards more effective, and on improving corporate disclosure. Professor Palepu teaches these topics in several HBS programs aimed at members of corporate boards: "How to make corporate boards more effective, "Audit Committees in the new era of governance, "Compensation Committees: Preparing the challenges ahead."

Professor Palepu has done extensive research on mergers and acquisitions and corporate disclosure. Based on this work, he coauthored the book, Business Analysis and Valuation: Text and Cases, which won the American Accounting Association's Wildman Award for its impact on management practice, as well as the Notable Contribution to the Accounting Literature Award for its impact on academic research. This book, translated into Chinese, Japanese, and Spanish, is widely used in leading MBA programs all over the world. It is accompanied by a business analysis and valuation software model published by the Harvard Business School Publishing Company.

Professor Palepu has a doctorate from the Massachusetts Institute of Technology, and an Honorary Doctorate from the Helsinki School of Economics and Business Administration.The late Victor Bernard was a CPA and held a Ph.D. from the University of Illinois. He was Director of the Paton Accounting Center at the University of Michigan and Director of Research for the American Accounting Association.Paul M. Healy is James R. Williston Professor of Business Administration, and

Unit Head, Accounting and Management, at Harvard Business School, Harvard University. Professor Healy joined Harvard Business School as a Professor of Business Administration in 1997. Professor Healy received his B.C.A. Honors (1st Class) in Accounting and Finance from Victoria University, New Zealand in 1977, his M.S. in Economics from the University of Rochester in 1981, his Ph.D. in Business from the University of Rochester in 1983, and is a New Zealand CPA. In New Zealand, Professor Healy worked for Arthur Young and ICI. Prior to joining Harvard, Professor Healy spent fourteen years on the faculty at the M.I.T. Sloan School of Management, where he received awards for teaching excellence in 1991, 1992, and 1997. He is the co-author of one of the leading financial analysis textbooks, Business AnalysisandValuation. In 1993-94 he served as Deputy Dean at the Sloan School, and in 1994-95 he visited London Business School and Harvard Business School.

Professor Healy's research includes studies of the role and performance of financial analysts, how firms' disclosure strategies affect their costs of capital, the performance of merging firms after mergers, and managers' financial reporting decisions. His work has been published in The Accounting Review, Journal of Accounting and Economics, Journal of Accounting Research, and Journal of Financial Economics. In 1990, his article "The Effect of Bonus Schemes on Accounting Decisions," published in Journal of Accounting and Economics, was awarded the AICPA/AAA Notable Contribution Award. His text Business AnalysisandValuation was awarded the AICPA/AAA's Wildman Medal for contributions to the practice in 1997 and the AICPA/AAA Notable Contribution Award in 1998

PART I Introduction 1. A Framework for Doing Business Analysis Using Financial Statements PART II Business Analysis Tools 2. Business Strategy Analysis 3. Accounting Analysis 4. Financial Analysis 5. Prospective Analysis: Forecasting 6. Prospective Analysis: Valuation Based on Discounted Cash Flows 7. Prospective Analysis: Accounting-Based Valuation Techniques PART III Business Analysis Applications 8. Equity Security Analysis 9. Credit Analysis and Distress Prediction 10. Mergers and Acquisitions 11. Corporate Financing Policies 12. Management Communications