How Finance Works: The HBR Guide to Thinking Smart About the Numbers
by Mihir A. Desai
This is an outstanding book which presents some complicated topics in a clear, well-organized manner with real-world examples. The author, a professor of finance and taxation at Harvard Business School and Harvard Law School, includes some sidebar commentary from two CFOs, an investment banker, and a hedge fund manager.
Continue reading “How Finance Works”
Narrative and Numbers: The Value of Stories in Business
by Aswath Damodaran
Aswath Damodaran is a professor of finance at NYU who has written several books on business valuation, including The Little Book of Valuation: How to Value a Company, Pick a Stock, and Profit.
In this book, he computes valuation based on the business narrative. “One of the most important lessons I have learned is that a valuation that is not backed up by a story is both soulless and untrustworthy and that we remember stories better than spreadsheets.” Conversely, “when a storyteller has wandered into fantasyland, the easiest way to bring him or her back to Earth is with data that suggests the journey is either impossible or improbable.” Thus, “you need to bring both stories and numbers into play in investing and business, and valuation is the bridge between the two.” Continue reading “Narrative and Numbers”
The Little Book of Valuation: How to Value a Company, Pick a Stock, and Profit
by Aswath Damodaran
How do you determine if a stock is overpriced or a bargain? NYU finance professor Aswath Damodaran explains.
“There are dozens of valuation models but only two valuation approaches: intrinsic and relative… The intrinsic value of an asset is determined by the cash flows you expect that asset to generate over its life and how uncertain you feel about these cash flows. Assets with high and stable cash flows should be worth more than assets with low and volatile cash flows… In relative valuation, assets are valued by looking at how the market prices similar assets.”
The Key Point 