Investment Science

Book Description

Fueled in part by some extraordinary theoretical developments in finance, an explosive growth of information and computing technology, and the global expansion of investment activity, investment theory currently commands a high level of intellectual attention. Recent developments in the field are being infused into university classrooms, financial service organizations, business ventures, and into the awareness of many individual investors. Modern investment theory using the language of mathematics is now an essential aspect of academic and practitioner training. Representing a breakthrough in the organization of finance topics, Investment Science will be an indispensable tool in teaching modern investment theory. It presents sound fundamentals and shows how real problems can be solved with modern, yet simple, methods. David Luenberger gives thorough yet highly accessible mathematical coverage of standard and recent topics of introductory investments: fixed-income securities, modern portfolio theory and capital asset pricing theory, derivatives (futures, options, and swaps), and innovations in optimal portfolio growth and valuation of multiperiod risky investments. Throughout the book, he uses mathematics to present essential ideas of investments and their applications in business practice. The creative use of binomial lattices to formulate and solve a wide variety of important finance problems is a special feature of the book. In moving from fixed-income securities to derivatives, Luenberger increases naturally the level of mathematical sophistication, but never goes beyond algebra, elementary statistics/probability, and calculus. He includes appendices on probability and calculus at the end of the book for student reference. Creative examples and end-of-chapter exercises are also included to provide additional applications of principles given in the text. Ideal for investment or investment management courses in finance, engineering economics, operations research, and management science departments, Investment Science has been successfully class-tested at Boston University, Stanford University, and the University of Strathclyde, Scotland, and used in several firms where knowledge of investment principles is essential. Executives, managers, financial analysts, and project engineers responsible for evaluation and structuring of investments will also find the book beneficial. The methods described are useful in almost every field, including high-technology, utilities, financial service organizations, and manufacturing companies.

Customer Reviews:

It might be a good finance book,.......2007-08-14

but it's a terrible math book.

Too often, explanations, examples, and problems do not clearly explain the meanings of variables and applicable assumptions. This poor presentation of material makes the book barely usable to someone trying to learn the material for the first time.

superb coverage of subject matter.......2007-07-30

Prof. Luenberger currently teaches at Stanford and this book is used as the textbook for a 2-quarter series in investment science there. The coverage is concise and the math is manageable and yet extremely practical. I agree that this an excellent self-study book in the subject of investment science.

good but not excellent.......2007-03-15

This book serves very good introduction to mathematical finance. Particularly,
I enjoyed the discussion of bonds immunization, mean-variance theory, CAPM, APT.
It's most suitable for senior undergraduates or any junior graduate students.
But it doesn't deserve 5 star for the following reasons:

1) Most of the theories discussed so far in the book are TOO idealized and
over simplified. Financial data is dynamic and massive. In model quantitative/computational finance, the most important thing is to understand what the data says rather than what one thinks the data structure might be. With the book, one probably can only do some macroeconomic/very coarse analysis. Author should incorporate more data analysis evidence together with proposed theories.

2) The proof of ito's lemma is wrong(i.e. "Deltaz^2 --> deterministic as Deltat --> 0"). It's surprising since most books make the same mistake. It is the law of the large number contributes to the equality!(i.e. integration sense). The misunderstanding of the proof might lead to the misunderstanding of the hedging process.

3) In the commodity option pricing session, author demonstrated the use of futher market to price the option. This should be discussed further (i.e. black's model).

4) The volatility pumping session should be further researched. The explanation is
not satisfactory.

Good book to understand quantitative finance.......2005-06-10

Luenberger was a professor of optimization and his books on that subject are also very good. Clear and Precise. But sometimes he is extremely concise, so that you need to work a bit to completely understand a point.

In this book, we have again the same style (after all, it is the author style): Clear and precise book, GOOD choice of notation (I cant say the same thing about HULL's books) but sometimes extremely concise.
Overall, a good book to start learning and on a solid foundation.

Investment Science must have.......2005-03-24

Great book, covers lots of material and goes beyond by using the log utility to portfolio growth. Great buy!!!!

Financial Analysis Tools and Techniques: A Guide for Managers

Average customer rating:

Financial Analysis Tools and Techniques: A Guide for Managers
Erich A. Helfert
Manufacturer: McGraw-Hill
ProductGroup: Book
Binding: Hardcover

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ASIN: 0071378340

Book Description

Praise for Financial Analysis Tools and Techniques:

"Bona fide treasury for executives, managers, entrepreneurs. Have long used this great work in corporate & university programs. Uniquely makes the arcane clear."Allen B. Barnes, Provost, IBM Advanced Business Institute

"A candidate for every consultant-to-management's bookshelf. Its beauty lies in the dynamic model of the business system and its management decision framework."Stanley Press CMC, Book review in C2M Consulting to Management Journal

"Goes a long way to remove the mystery from business finance. Approach allows managers from all areas to understand how their decisions impact shareholder value."Stephen E. Frank, Chairman and Chief Executive Officer, Southern California Edison

"Helfert has rare ability to make financial concepts understandable to those lacking financial background. His finance seminars exceeded our high expectations."L. Pendleton Siegel, Chairman and Chief Executive Officer, Potlatch Corporation

"Commend the clarity, organization and currency of contents. There is no other book available that does the task in such an understandable and accessible way."Dr. Thomas F. Hawk, Frostburg State University

"Helfert's excellent overviews and simplified models effectively broadened our managers' understanding of their fiscal responsibility to HP and our shareholders."Robert P. Wayman, Executive Vice President, Chief Financial Officer, Hewlett-Packard Company

"The book has become a classic, and Helfert has been of substantial help to my company in teaching our people how to think about the numbers which drive it."Robert J. Saldich, President and Chief Executive Officer, Raychem Corporation

"Helfert has contributed to the development of financial skills of TRW managers through his book, case studies and presentations, and highly rated instruction."Peter S. Hellman, President and Chief Operating Officer, TRW Inc.

"Helfert has the ability to make financial concepts understandable, and his credibility and content added significantly to the success of our educational effort."Giulio Agostini, Senior Vice President Finance, and Office Administration, 3M Corporation

"Helfert's writing and teaching have become a mainstay for us, and his business and strategic sense have been recognized as valuable guides to our process."William H. Clover, Ph.D., Manager of Training, and AMOCO Learning Center

Concepts and tools for making sound business decisions

Financial Analysis Tools and Techniques, a business-focused revision of Erich Helfert's perennial college bestseller Techniques of Financial Analysis, is a quick, easy read for nonfinancial managers and an excellent refresher and reference for finance professionals. This practical, hands-on guide provides a new introductory chapter that gives context to today's valuation turmoil and helps professionals understand the economic drivers of a business and the importance of cash flow.

The book's overriding theme is that any business should be viewed as a dynamic, integrated system of cash flowsone that can be activated and managed by investment decisions. Topics, discussed in clear, comprehensive, and easy-to-understand detail, include:

Increasing shareholder value through value-based management (VBM)
Interpreting pro forma financial statements

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Financial Statement Analysis & Security Valuation w/ S&P package

Average customer rating:

A Terrible Text
Rich in substance
Master piece of this subject!

Financial Statement Analysis & Security Valuation w/ S&P package
Stephen Penman
Manufacturer: McGraw-Hill/Irwin
ProductGroup: Book
Binding: Hardcover

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ASIN: 0072508094

Book Description

This text focuses on the output of financial statements, not the input. As such, the book asks what financial statements tell you, not how they are prepared. The idea is to get students to see accounting "working." The particular use of financial statements that the book focuses on is valuation. The text takes the approach that the best way to accurately value a firm is to look at the future earnings of the firm. The main pretext of the book is that financial statement analysis and valuation analysis are inextricably entwined: valuation is an exercise in financial statement analysis. Financial statement analysis is directed by the need to get information for valuation. Accordingly, the book brings finance and accounting concepts together. The book stresses concepts, but the idea is to show how to move from concepts to practice.

Customer Reviews:

A Terrible Text.......2003-06-23

This is a required text for Bussiness Analysis and Valuation at the University of Western Australia, so unfortunately I had to read it.
This book explains everything in a very long winded, round about way, making simple ideas difficult to comprehend. There are no key points that are highlighted seperate from the main body of witing, making revision tedious. The exercises at the back of this book often miss out vital parts of the question, or have errors, making them impossible to do with out the solutions, that do not come with book.
If possible I would highly recommend that you avoid this book.

Rich in substance.......2002-10-03

The book spans from the introduction of financial statements to the theory and application of complex accounting analysis and valuation. It brings both fields together in accounting based valuation. It has a good structure, many examples, is clearly written (albeit at times lenghty), and is very rich in substance.

What I really liked about the text, though, is that it is grounded in principles and uses these to take you through many of the currently relevant, controversial and complex accounting issues many of us who have been dealing with the subject matters will have run into. This will make you think these issues through and reach an informed opinion.

Master piece of this subject!.......2001-03-02

This is by far the best one available in the market. Each chapter is well structured and tied together. You can not afford to miss any of them to get a good understanding of this topic. Basic finance background is needed to benefit from this book. Great insight and understanding.

CFROI Cash Flow Return on Investment Valuation : A Total System Approach to Valuing the Firm

Average customer rating:

Good primer for non-finance people; fun, light mental workout for practitioners
CFROI explains stock prices better than P/E ratios
The millenium stock selection model

CFROI Cash Flow Return on Investment Valuation : A Total System Approach to Valuing the Firm
Bartley Madden
Manufacturer: Butterworth-Heinemann
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Binding: Hardcover

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ASIN: 0750638656

Book Description

What generates shareholder value? How can it be evaluated? How can it influence investment decisions and corporate strategy? Cash Flow Return On Investment answers all these questions by detailing the pioneering financial research carried out by HOLT Value Associates, the leading consultancy in the field.

Read this book if you want to find out what really drives the wealth generation in any business, allowing you to pick which equities will succeed and which strategic initiatives are destined for high returns.

The CFROI model is an essential tool for professionals working in finance and corporate strategy. It clarifies how economic value is created in a firm and acts as a reliable guide to:

* making investment decisions
* taking key strategic decisions
* understanding economic value

Shows how to judge and compare individual equities across markets and company sectors
Cutting edge theory and practice
The leading book about shareholder value authored by one of the world's leading consultancies in the field

Customer Reviews:

Good primer for non-finance people; fun, light mental workout for practitioners.......2006-02-24

Madden's "CFROI Valuation" is a good primer on valuation, especially for non-financial practitioners, managers, and executives of public firms who have been pounded in the last decade with the goal of maximizing shareholder value today - even at the risk of tomorrow. A cursory review of numerous other books and articles on valuation shows that the topic has become somewhat of an art-meets-science cliché. Madden provides a relatively fresh approach on the topic using the cashflow return on investment (CFROI) perspective.

Standard valuation is largely driven by a measure of cashflows, the long and short term capital investment required to achieve such cashflows, the growth and sustainability of such cashflows, and a cost of capital used to fund such activities. Here the science begins to shift into art - to determine what to do with the cashflows - usually to discount them and/or to apply some metric to arrive at value.

Similar to other widely read valuation books such as Koller's "Valuation" published by McKinsey & Co. and "Damodaran on Valuation", I would recommend this book especially to non-financial managers and executives, as an informative, introductory primer on valuation. Madden provides easy-to-understand, step-by-step guidance on valuing a company including analytical assumptions (remember the art!). Though much of the book is presumably written from the perspective of an institutional investor analyzing stocks, Madden delves into CFROI with enough breadth to make valuation and other financial professionals ponder its broader applications.

With that said, I think practitioners including investment bankers, business appraisers, and valuations consultants as well as CFO's and heads of corporate development may find Madden's "CFROI Valuation" a fun work-out of the mind. The book provides useful frameworks around which to ponder current events and trends with a less conventional valuation approach.

In dispelling traditional valuation methods and practices, Madden helps to remind, though not explicitly stating such, that formulas and technical analysis may measure value but they don't determine value.

CFROI explains stock prices better than P/E ratios.......1999-06-30

Best finance book I have read in years!

The book is a quick read and does a terrific job of explaining the investment framework employed by institutional portfolio managers world-wide. CFROI brings the concept of return on invested capital to a more robust level by providing the investor with a greater understanding of stock price movement and valuation.

This book is a must read if you expect to outperform the market. The increased complexity of accounting rules over the last decade has forced investors to apply an analysis process focused on a company's future cash flows. The accuracy of the CFROI valuation framework places traditional analysis and EVA at the bottom of the investor's toolbox. CFROI can help you avoid value trap stocks and step up to high PE stocks who are expected to create wealth for their shareholders.

The millenium stock selection model.......1998-11-22

Madden's text substitutes empirical fact for academic claptrap, clearing away the underbrush of neat-though-erroneous theories like CAPM and EVA, giving the conscientious professional and serious amateur a meticulous roadmap to superior understanding and investment returns. Or in Madden's words, "The employment of CAPM/beta and related procedures has become a ritual due not to empirical usefulness, but to its mathematical elegance - the touchstone of mainstream academic corporate finance." The justification for CFROIs demanding discipline is demonstrated early in the text in an example, wherein the past real record of a hypothetical firm with a stable 6.5 % ROI is converted into GAAP accounting numbers from which an ROI series is calculated. In re the accounting-based return history, Madden asks, "Who referring to (the chart) would not be misled about a firm's performance relying on the (ROI gyrating between + 24% and -10%) while the economic performance did not vary?" In short, if you don't know the facts, you can't solve the mystery. The predictive and interpretive powers of the system's valuation metric is the result of plain hard work, not the magical properties of some lazy man's statistical dowsing rod like Earnings Momentum. Last widely employed during the Tulip Craze of an earlier century, Earnings Momentum is based on the dubious concept that as long as accounting earnings, surreal and manipulable though they be, go up, the stock should go up as fast as it does go up, unless earnings don't go up as fast as expected, in which case we've been disappointed, so it's not worth anything until the bookies can reestablish the odds. Had we all expended the necessary effort on CFROI, we might have anticipated or at least understood to our financial benefit and peace of mind: IBM problems in the mid-80s to mid-90s that led to a restructuring; Wal-Mart's staggering gait beginning in the late 80's that produced unsatisfactory price action in the early 90's; Hewlett Packard's defiance of gravity in maintaining an exceptional internal rate of return; ditto Abbot Labs, Hershey and Wrigley's outperforming the market; the rebound of Analog Devices and the volatility of Advanced Micro Devices; and so on and on. The CFROI knowledge system dissects the firm and the value creation process, meticulously separating the past and present from the nebulous future, thereby establishing a mathematical basis for professional investment decision making. The CFROI valuation model applies dividend discount technique to inflation-adjusted cash flow growth projections, using a firm-specific risk premium plus the market-required rate of return to determine the firms warranted value and the equity's warranted price. CFROI resolves two fundamental equity valuation issues: the recognized fallibility of the Capital Asset Pricing Model and the inherent inconstancy of accounting data. The former supplying a counter-intuitive cost of capital or required rate of return; the other concealing the real prospects of the firm's wealth creating efforts. As the lengthy flow charts detailing the process required to turn accounting hash into economic reality attest, CFROI is not a black box of unexplained miracles. It's a sweatshop equipped with empirically-proven, high tech tools which give the driven amateur and dedicated professional the means to outrun the herd.

Average customer rating:

Best Investing Book I Have Ever Read
UP 45% LAST YEAR THANKS TO THIS BOOK!!
Not Helpful
I've made 33% a year by buying growth stocks!
I'VE AVERAGED 27% PER YEAR DUE TO THIS BOOK

Cash Flow and Security Analysis
Kenneth S. Hackel , and Joshua Livnat
Manufacturer: McGraw-Hill
ProductGroup: Book
Binding: Hardcover

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ASIN: 0786304073

Book Description

Revised and updated to reflect the latest thinking in the area of cash flow analysis, Cash Flow and Security Analysis, is written with the underlying assumption that cash flow analysis is the most important tool at the investor's disposal. You will discover why cash flow is quickly replacing earnings as the primary tool among securities analysts and how they can identify undervalued securities using cash flow analysis. This important reference shows you how to avoid common costly mistakes.

Customer Reviews:

Best Investing Book I Have Ever Read.......2002-07-22

This book lays the foundation for making money in the markets. It is clear and to the point. The only book you really need.

UP 45% LAST YEAR THANKS TO THIS BOOK!!.......2000-08-12

I'VE COMPLETELY AVOIDED THE INTERNET HIGHFLYERS-THEY DON'T GENERATE FREE CASH FLOW. ON THE OTHER HAND THE BOOK PUT ME INTO COMPANIES WHOSE UNDERVALUED STOCKS QUICKLY TURNED AROUND WITH THERE LOW DEBT HIGH FREE CASH FLOW. I PARTICULARLY LIKED THE WAY THE AUTHORS LOOK AT CORPORATE FAT

Not Helpful.......2000-02-07

I re-read sections of this book on cash flow analysis and found it much less useful than 5 years ago when I read the first edition. The market does not care anymore about smaller high free cash flow and low debt companies.

I've made 33% a year by buying growth stocks!.......1999-08-03

I buy growth stocks - not small to mid-cap deep value basic industry cyclicals. Buy Growth not Value! FREE CASH FLOW ANALYSIS DOES NOT WORK ANYMORE!

I'VE AVERAGED 27% PER YEAR DUE TO THIS BOOK.......1999-07-24

I BOUGHT THIS BOOK 5 YEARS AGO. WHILE I MISSED OUT ON MANY STOCKS THAT DOUBLED, I ALSO ESCAPED STOCKS THAT FELL IN HALF-OR MORE. I HAVE TURNED IN VERY CONSISTANT RETURNS OVER A LONG PERIOD OF TIME-WHAT'S WRONG WITH 27% PER YEAR?

Fixed Income and Interest Rate Derivative Analysis

Average customer rating:

Good book for intermediate level

Fixed Income and Interest Rate Derivative Analysis
Mark Britten-Jones
Manufacturer: Butterworth-Heinemann
ProductGroup: Book
Binding: Hardcover

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ASIN: 075064012X

Book Description

Fixed Income and Interest Rate Derivative Analysis gives a clear and accessible approach to the analytical techniques of debt instrument valuation. Without using complicated mathematical abstractions, this text shows that the fundamentals of fixed income and interest rate derivate analysis can be easily understood when seen as a small number of simple economic concepts.

* A comprehensive and accessible explanation of underlying theory, and its practical application * Case studies and worked examples from around the world's capital markets * How to use spreadsheet modelling in fixed income and interest rate derivative analysis

Concepts inroduced in this book are reinforced and explained, not with the use of high-powered mathematics, but with actual examples of various market instruments and case studies from North America, Europe, Australia and Hong Kong. The text also contains review questions which aid the reader in their understanding.

Mark Britten-Jones, BEcon, MA, PhD, is an Assistant Professor of Finance at the London Business School where he teaches Fixed Income Securities and Markets as part of a MBA and Master's course in Finance.

A comprehensive and accessible explanation of underlying theory, and its practical application.
Case studies and worked examples from around the world's capital markets.
How to use spreadsheet modelling in fixed income and interest rate derivative valuation.

Customer Reviews:

Good book for intermediate level.......2000-02-04

The book, though terse and short, is brilliant for a quick tour through the fixed income aspects of bonds, swaps and derivative instruments.

I would have liked more detail on FRNs and Swaps with some practical examples of real FRNs with Interest swaps. An area which many books fail to address. Also the book should have put more emphasis on the mark-to-market of these instruments.

Book Description

Techniques of Financial Analysis, Ninth Edition approaches business as a system of fundamentals which is activated by management decisions, investment, operations and financing. The ValueSource software is essential to analyze your firm's financial performance, financial budgets, business dynamics and business value. This thoroughly updated and revised bestseller is a practical action guide to: managing for shareholder value; understanding your business system; analyzing and projecting financial performance; evaluating capital investments; understanding the cost of capital; choosing financing alternatives; valuing a business and its parts.

Customer Reviews:

Don't try to learn anything from this book.......2002-11-21

This may be a great book if you already know everything about finance. I've taken MBA level Finance courses, and quite honestly, I found this book difficult to understand. The author casually mentions financial concepts without defining them and expect you to understand complex financial theories he hasn't covered.

I tried to do the questions at the end of each chapter, and while there is an answer guide, it does nothing to explain how the answer was derived. How you get the answer is the important part, but this text won't give you any assistance. Plus, some of the answers were just plain wrong (I checked with several experts).

There are better texts out there - your time is better spent elsewhere.

Would have been good w/o the errors.......2002-07-21

If you read a financial text w/o checking the numbers, you wouldn't find the mistakes. This book has had too many, because I am checking the numbers. I had to cross reference this book with a Financial Accounting text b/c I kept thinking I was incorrect.

All I have to say is take a look at pages 100, 101, 102 for great examples of the many mistakes. I am not happy.

By the way, I picked up this book from a friend in order to gauge whether I would buy the new version. Guess what I am not going to buy?

The most well-thought-out book of its kind!.......1999-11-01

Professor Helfert's graphic presentations have caused concepts to gel that were amorphous in my mind for years despite an investment banking background. I would recommend this book as a first book to anyone interested in quickly obtaining a bird's eye view of the business entity from a "business systems" approach. Helfert's position is that of an engineer or a scientist: Every business has a structure that can be indentified, analyzed, and then manipulated to increase shareholder value.

Every new issue refers back to the Investment, Operations, Financing structure Helfert lucidly charts out in the introductory chapter. If this is old hat to you, and you've read Corp. Fin. by Brealy & Meyers (sp?), maybe you don't need this book. All others: BUY IT!!!

It's the best book that I had read.......1999-07-07

I read russian translation of this book. There are only 8000 examples in russian and this book became a deficit in 1996 (when it was published in Russia). Now I want to read the English (original) version of this wonderful book. The most impressions are from the detailed (comprehensive) theory with detailed exercises and notes.

Let say my Great Thanks to author for his excellent book.

With regards, Sergey Krupin

Terrible!!.......1999-01-07

This is the worst text book I have ever purchased for a class. It is full of errors and is very difficulty to follow. There are not enough practice problems and the answer key does not give enough information as to how the answer came about. There are discrepencies from one page to the next.

The Guide to Understanding Financial Statements

Average customer rating:

Great Buy!!! Easy to Read and Understand
A Hands Down Great Book For Beginning Managers

The Guide to Understanding Financial Statements
S. B. Costales , and Geza Szurovy
Manufacturer: McGraw-Hill
ProductGroup: Book
Binding: Hardcover

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ASIN: 0070131910

Book Description

There's no mystery to understanding company financial statements Even if you have no financial or accounting background, you can read those intimidating-looking financial statements as easily as A-B-C. The second edition of The Guide to Understanding Financial Statements, by S.B. Costales and Geza Szurovy, makes all the numbers and jargon absolutely clear. In seconds you'll spot a company's strengths and weaknesses, see how its performance measures up, and have a solid basis for judging future prospects. The material is so easy to grasp, you'll know it all on first reading, Discover: what a balance sheet really reveals; the true significance of a profit and loss statement; what the six most important financial ratios are, and what each can tell you; how to tell when the numbers are favorable or not; how to spot fraud; how to discover whether the stated value of certain asests is true; much more.

Customer Reviews:

Great Buy!!! Easy to Read and Understand.......2002-06-27

This book was a big help to me. Having only a basic education in accounting, this book laid it out for me in a simple, easy-to-read manner. Definately a good buy!

A Hands Down Great Book For Beginning Managers.......2000-11-16

This book is amazing in that it gives a comprehensive,consise, and simple explanation for finicial statements. I have read many such books, yet this tops them all for its relative simplicity while still being able to get across its point. I would recommend this book to any beginning accountant, manager, or investor. This book shed light on information overlooked by unexperienced businessmen and is a great buy.

Cash Return on Capital Invested: Ten Years of Investment Analysis with the CROCI Economic Profit Model

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Cash Return on Capital Invested: Ten Years of Investment Analysis with the CROCI Economic Profit Model
Pascal Costantini
Manufacturer: Butterworth-Heinemann
ProductGroup: Book
Binding: Hardcover

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ASIN: 0750668547

Book Description

In this book, Pascal Costantini gives a lively and wonderfully readable account of ten years of efforts by a small group of investment analysts to find a reliable, practical and implementable method for valuing and selecting shares. The result of their effort is an original investment methodology called CROCI (Cash Return on Capital Invested), best described as a variation of the economic profit model. For over a decade now, Costantinis group at Deutsche Bank has been using this valuation tool every time it has had to take a view on the pricing of an equity asset, be it a market, a sector or an individual sharein other words, every single working day, since it is this groups job to advise institutional investors on equity valuation. Costantini describes in detail, accompanied by concrete examples in the form of charts and graphs, the precise investment results of the actual implementation of the CROCI approach in the global equity markets since 1996. Readers will enjoy taking this journey with Costantini to see how and why the model was developed, assess the results of ten years of actual implementation and measure the successes of using this model in stock picking and portfolio construction. This book will also make it easy for them to see how the CROCI approach can be used successfully by others now and in the future.
The book is divided into four parts. The first part is a review and discussion of the fundamentals of investment analysis. The second part is dedicated to the construction of economic data, with the sole objective of calculating an economically meaningful asset multiple and relative return, the combination of which gives an economic PE ratio, the authors main stock selection tool. While the economic profit model is not exactly new, it is still largely ignored by the investment community. In essence, it does three things: it calculates the real amount of cash, or value created by a business; it compares the market value of an asset to an approximation of its replacement value; and it assumes that the former will converge to the latter through the arbitrage of investors and capital providers. The third part is dedicated to the analysis of economic data, and the last part deals with the actual implementation of the CROCI economic profit model, including real life examples. This final part also discusses how to use the output of the CROCI model with individual stocks, and then with investment portfolios.

*Techniques are based on the authors performance record at Deutsche Bank since 1996
*Based on almost ten years of proprietary knowledge and implementation of these techniques
*Factual illustrations of the results of the valuation techniques are provided at each step

*Techniques are based on the author's performance record at Deutsche Bank since 1996
*Based on almost ten years of proprietary knowledge and implementation of these techniques
*Factual illustrations of the results of the valuation techniques are provided at each step

Techniques of Financial Analysis: A Guide to Value Creation

Average customer rating:

Book is great, software related to the book is not
The Professor Says:

Techniques of Financial Analysis: A Guide to Value Creation
Erich A. Helfert
Manufacturer: Irwin/McGraw-Hill
ProductGroup: Book
Binding: Paperback

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ASIN: 0072299886

Book Description

This best-selling practical guide for managers and students of business emphasizes the financial concepts and tools that are essential for making sound business decisions in order to create shareholder value. The book's major appeal for over 35 years, with 500,000 copies in print in 9 languages, has been its direct, concise, no-nonsense approach. The 10th (millennium) edition maintains the unique perspective that any business can be viewed as a dynamic, integrated system of cash flows, which are activated by management decisions.

Customer Reviews:

Book is great, software related to the book is not.......2006-12-09

The graphical presentations and practical explanations are very helpful to valuation practitioners. I was so impressed I purchased the related software that is promoted in and modeled after the book. It never functioned correctly, and after a week of trying to reach technical support I finally reached them and they didn't really try to resolve the software's Visual Basic malfunction. Book is great, but ignore it's promotion of the software.

The Professor Says:.......2001-05-18

Having read his sixth edition, I was impressed enough with the 10th edition that I use it for the college class I teach. Unlike most books in this area, Dr. Helfert's book is easy to read and VERY practitioner oriented. I truly believe that if you have an interest in financial analysis, either as an investor or from the perspective of running your own organization, this is the single most valuable resource you could own. If I didn't believe that was true, I'd have my students using a different book.

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