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Accounting for Value (Columbia Business School Publishing)

Amazon.com Price:  $27.16 (as of 12/05/2019 14:42 PST- Details)

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Description

Accounting for Value teaches investors and analysts how to care for accounting in evaluating equity investments. The book’s novel approach shows that valuation and accounting are much the same: valuation is in reality a matter of accounting for value.

Laying aside a few of the tools of brand new finance—the cost-of-capital, the CAPM, and discounted cash float analysis—Stephen Penman returns to the common-sense principles that have long guided fundamental making an investment: price is what you pay but value is what you get; the risk in making an investment is the risk of paying too much; anchor on what you know somewhat than speculation; and beware of paying too much for speculative growth. Penman puts these ideas in touch with the quantification supplied by accounting, producing practical tools for the intelligent investor.

Accounting for value provides protection from paying too much for a stock and clues the investor in to the likely return from buying growth. Strikingly, the analysis finesses the want to calculate a “cost-of-capital,” which steadily frustrates the application of brand new valuation techniques. Accounting for value recasts “value” as opposed to “growth” making an investment and explains such curiosities as why earnings-to-price and book-to-price ratios predict stock returns. By the end of the book, Penman has the intelligent investor thinking like an intelligent accountant, better equipped to care for the bubbles and crashes of our time. For accounting regulators, Penman also prescribes a formula for intelligent accounting reform, engaging with such controversial issues as fair value accounting.

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