Book Details

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    • December 2010
    • 9780231151184
  • 264 Pages
  • Hardcover
  • $44.95
  • / £31.00


    • December 2010
    • 9780231521857
  • 264 Pages
  • E-book
  • $43.99
  • / £30.50

Accounting for Value

Stephen Penman

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.

About the Author

Stephen Penman is George O. May Professor of Accounting and Morgan Stanley Research Scholar at the Columbia Business School. He is the author of Financial Statement Analysis and Security Valuation, for which he received a Wildman Medal Award, and an editor of the Review of Accounting Studies.

Penman's book...contains gems on every page - to the point that no one who deals with the market in any capacity should pass by this text until they have committed to memory as many points therein as their limited, mark one, human brains, can hold.

Anthony Harrington

I highly recommend the essential and fundamentals oriented book Accounting for Value by Stephen Penman, to anyone who is serious about investing in sound, fundamental stocks. This book will benefit the beginning or experienced investor, accountants, and anyone interested in the coupling of accounting with equity valuation.

For a practical book that will help you understand the use of accounting in understanding stock valuation, Accounting for Value is the resource you are looking for you.

IntroductionChapter 1 Return to Fundamentals (and an Accounting for the History of Investment Ideas)Chapter 2 Anchoring on Fundamentals (and How Accounting Supplies the Anchor)Chapter 3 Challenging Market Prices with Fundamentals (and Deploying Accounting for the Challenge)Chapter 4 Accounting for Growth from Leverage (and Protection from Paying Too Much for Growth)Chapter 5 Accounting for Growth in the Business (and More Protection from Paying Too Much for Growth)Chapter 6 Accounting for Risk and Return (and a Remedy for Ignorance About the Cost-of-Capital)Chapter 7 Pricing Growth (and a Revision to Value Versus Growth Investing)Chapter 8 Fair Value Accounting and Accounting for Value Chapter 9 Adding Value to AccountingChapter 10 The Intelligent Investor and the Intelligent Accountant

Read the >Introduction.