Accounting for Value

✍ Scribed by Stephen H. Penman

• Publisher: Columbia University Press
• Year: 2011
• Tongue: English
• Leaves: 265
• Series: Columbia Business School Publishing
• Category: Library

✦ Synopsis

Accounting for Value teaches investors and analysts how to handle accounting in evaluating equity investments. The book's novel approach shows that valuation and accounting are much the same: valuation is actually a matter of accounting for value. Laying aside many of the tools of modern finance—the cost-of-capital, the CAPM, and discounted cash flow analysis—Stephen Penman returns to the common-sense principles that have long guided fundamental investing: price is what you pay but value is what you get; the risk in investing is the risk of paying too much; anchor on what you know rather 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 need to calculate a "cost-of-capital," which often frustrates the application of modern valuation techniques. Accounting for value recasts "value" versus "growth" investing 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 handle 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. (5/11/2011)

✦ Table of Contents

Table of Contents
......Page 6
Introduction
......Page 8
1. Return to Fundamentals (and an Accounting for the History of Investment Ideas)......Page 22
2. Anchoring on Fundamentals (and How Accounting Supplies the Anchor)......Page 56
3. Challenging Market Prices with Fundamentals (and Deploying Accounting for the Challenge)......Page 85
4. Accounting for Growth from Leverage
(and Protection from Paying Too Much for Growth)......Page 103
5. Accounting for Growth in the Business
(and More Protection from Paying Too Much for Growth)......Page 125
6. Accounting for Risk and Return (and a Remedy for Ignorance About the Cost-of- Capital)......Page 149
7. Pricing Growth
(and a Revision to Value Versus Growth Investing)......Page 168
8. Fair Value Accounting and Accounting for Value
......Page 187
9. Adding Value to Accounting
......Page 210
10. The Intelligent Investor and the Intelligent Accountant
......Page 229
Notes
......Page 232
Index
......Page 258