Describe the role of accounting numbers in corporate valuation.

Corporate valuation involves estimating the worth or price of a company,one of its operating units,or its ownership shares.Some equity valuation approaches are based on discounting a firm's future earnings or free cash flows.In such settings,the role of accounting numbers (i.e.,the information in financial statements)is to aid in the development of projections of the firm's future earnings and cash flows.These projections are then discounted at the firm's risk-adjusted cost of equity capital to arrive at an estimate of the equity's value.