num_pages: 244
description: 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 valuation is actually a matter of accounting for value.Laying aside many of the tools of modern financethe cost-of-capital the CAPM and discounted cash flow analysisStephen Penman returns to the common-sense principles that have long guided fundamental 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.
language: English
title: Accounting for Value
publisher: Columbia Business School Publishing