Financial Statement Analysis and Security Valuation [Hardcover]

Stephen Penman (Author)

Book Description

ISBN-10: 007253317X | ISBN-13: 978-0072533170 | Publication Date: July 23, 2003 | Edition: 2

Penman's Financial Statement Analysis and Security Valuation 2/e focuses on the output of financial statements, not the input. As such, the book asks what financial statements tell you, not how they are prepared. The idea is to get students to see accounting "working." The book focuses on using financial statements in valuation. The text takes the approach that the best way to accurately value a firm is to look at the future earnings of the firm. The main pretext of the book is that financial statement analysis and valuation analysis are inextricably entwined: valuation is an exercise in financial statement analysis. Financial statement analysis is directed by the need to get information for valuation. Accordingly, the book brings finance and accounting concepts together. The book stresses concepts, but the idea is to show how to move from concepts to practice.

Editorial Reviews

About the Author

Stephen Penman is the George O. May Professor and the Morgan Stanley Research Scholar in the Graduate School of Business, Columbia University. He also serves as co-director of Columbia's Center for Excellence in Accounting and Security Analysis. Prior to his appointment at Columbia in 1999, Stephen Penman was the L.H. Penny Professor in the Walter A. Haas School of Business at the University of California at Berkeley. From 1990-95 he served a Chairman of the Professional Accounting Program and Chairman of the Accounting Faculty at Berkeley. He also initiated and chaired Berkeley's Annual Conference on Financial Reporting. He has served as a Visiting Professor at Columbia University and the London Business School of Economic. Professor Penman received a first-class honors degree in Commerce from the University of Queensland, Australia, and M.B.A. and Ph.D. degrees from the University of Chicago. His research is concerned with the valuation of equity and the role of accounting information in security analysis. He has published widely in finance and accounting journals and has conducted seminars on fundamental analysis and equity evaluation for academic and professional audience. In 1991 he was awarded the Notable Contribution to Accounting Literature Award by the American Accounting Association and the American Institute of Certified Public Accountants, and in 2002 he was awarded the American Accounting Association and Deloitte & Touche Wildman Medal for his book, Financial Statement Analysis and Security Valuation, published by McGraw-Hill/Irwin. He is managing editor of the Review of Accounting Studies and is on the editorial board of the Schmalenbach Business Review.

Product Details

• Hardcover: 768 pages
• Publisher: McGraw-Hill/Irwin; 2 edition (July 23, 2003)
• Language: English
• ISBN-10: 007253317X
• ISBN-13: 978-0072533170
• Product Dimensions: 10.1 x 8 x 1.3 inches
• Shipping Weight: 3.5 pounds
• Average Customer Review: 3.8 out of 5 stars  See all reviews (21 customer reviews)
• Amazon Best Sellers Rank: #886,721 in Books (See Top 100 in Books)

More About the Author

Stephen Penman is George O. May Professor of Accounting 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.

(Photo by Lynn Saville)

Customer Reviews

Most Helpful Customer Reviews

33 of 33 people found the following review helpful:

5.0 out of 5 stars Excellent!, August 21, 2003

By 

Charles R. Williamson (Helena, MT USA) - See all my reviews
(REAL NAME)   

This review is from: Financial Statement Analysis and Security Valuation (Hardcover)

I've studied innumerable books on Security Analysis, but have yet to find one that satisfied my desire to fully integrate financial statement analysis with valuation--until now! Penman's book does an excellent job of presenting all the various valuation methods and critiquing the strengths and weaknesses of each one. He does a superb job of showing the relationship between cash flow and accrual accounting and how each relates to valuation. He also shows how corporate strategy affects both the financials and valuation and how to do decent pro formas. For the studious stock analyst, this book is well worth the extra time required to digest its many insights. I rate this book second only to the original Graham and Dodd's Security Analysis.

22 of 23 people found the following review helpful:

5.0 out of 5 stars Best Fundamental Analysis Textbook, September 19, 2004

By 

Andrew Berens (New Orleans, LA USA) - See all my reviews
(REAL NAME)   

This review is from: Financial Statement Analysis and Security Valuation (Hardcover)

I must first disclose that I am a student in Professor Penman's class at Columbia, therefore I may have some insights and access to items that other readers may not have. Nonetheless, this textbook is amazing! I am in my last 2 electives before graduating from a dual MBA program at Columbia/LBS, and this textbook and class are "pulling everything together." I have taken 5 finance courses and 3 accounting classes and thus, have a pretty good background in finance/accounting, despite being a physician with no practical experience in the financial services industry (yet).

THE BOOK: What I have found different about this text book and every other finance/valuation textbook I have used in my studies including Brealey and Myers (the finance bible)is that it handles both the broad, conceptual aspects and the nuts-and-bolts valuation tools extremely well. Penman is able to start with a broad concept and then introduce valuation tools/techniques that build on these concepts. This makes it easier to understand and remember the valuation process (at least for me). The graphs and diagrams are equally helpful (for a change) and re-enforce the textual information. In contrast, the McKinsey valuation textbook (bible #2) is good on the conceptual aspects, but lacks tremendously in the detailed analysis sections. The additional workbook for the McKinsey book fails miserably as well. This textbook has it all, and provides an excellent framework and tool set to enter the financial services industry.

13 of 13 people found the following review helpful:

5.0 out of 5 stars Easily the best book in the field..., August 22, 2004

By 

V. Childers "VChilders" (Fairfield, CT USA) - See all my reviews
(REAL NAME)   

This review is from: Financial Statement Analysis and Security Valuation (Hardcover)

Penman's book is rapidly becoming THE textbook for MBA courses in fundamental analysis and equity valuation, and rightly so. The approach he suggests just plain makes good economic sense, and he is able to offer a method that allows the users of financial statements to get to the core of how economic profits are created, and perhaps most importantly, how those profits should be valued.

In the end, of course, no one has all of the answers -- a major weakness in the book, in my opinion, is a less-than-complete discussion of the issues surrounding the determination of the elusive "cost of operations". He rather vaguely suggests the application of a basic statistical method that I won't go into here (read the book and see what you think!), but the discussion is a little thin and will hopefully be beefed up in future editions. But, hey, like I said: no one has really cracked the case on this perennial grey area, and Penman's ideas are as good as any I've encountered.

Again, though, this book provides the reader with some rather powerful tools with which to tackle financial statements. My only regret is that I bought the softcover international edition to save some cash -- I can honestly say that this is the only textbook I've ever purchased where I wished I had picked up the hardcover edition. Don't make the same mistake. This is a text you will want to refer to time and time again, so just go ahead and buy the real, hardcover deal. I know I'll be picking up my own hardcover copy once the next edition is released.

Professor Penman, if you happen to read the reviews here, thanks for the effort and please keep striving to improve on this landmark text!!