Customer Reviews

Magic Numbers: The 33 Key Ratios That Every Investor Should Know

5 star:		(2)
4 star:		(3)
3 star:		(1)
2 star:		(0)
1 star:		(0)

 

 

As a fund manager, I find that this book is beneficial to people working in the investment community or even to individual investors. It provides simple understanding to 33 financial ratios that are commonly used in the industry such as PBV, PER, ROCE, EV/EBITDA, etc. Nevertheless, silly mistakes in the examples given in the book undermine its credibility as a whole. For examples, in Figure 1.1 (pg 6), the share price is supposed to be $2.5 (and not $125 million) and in Figure 1.2, the author confuses the readers with the number of shares (532,798,000 or 532,748,0000?). To a novice, these errors may cause futher confusion as it would be difficult for him to understand the concepts. The author and editor of the book should have done a better job, especially considering that the subject involves is "investment".

Magic Numbers does for the investor what chicken soup does for the common cold. it may not make you rich but it certainly will help you feel better.
Every real estate investor knows what IRR is and probably would not buy without it,ergo, why should a market investor ignore the tools available to help make prudent market investments. Imagine what would have happened had the Enron investors used these tools instesd of market tips from the so called Pros.
Read it, use it and its even better then chicken soup.

Peter Temple's MAG1C NUM8ERS is a straightforward introduction and useful reference tool for the serious investor on this topic. At the core of fundamental analysis are financial ratios that are essentially measuring tools for reaching a better understanding of a company's strengths and weaknesses. Temple's book manages to take some of the mystery out of these 'Magic' numbers by assembling them in one place. Here we have an organized summary of thirty-three key financial ratios. With each one we get a) definition b) the formula c)where we can find the numbers d) how the ratio can be calculated e) a specific corporate example and f) what relevance the measurement has for investors. The predictable organization of the book means it is an easy reference to flip open when we need to refresh our understanding of a useful ratio. Temple's observations about applying particular ratios to specific kinds of companies are helpful. I, for one, would like to have have received even more help in this area. Temple is British and many of his examples are drawn from companies US investors will not warm-up to such as Singapore Telecom, UK retailer Kingfisher, or the German utility company RWE. I'd recommend reading this book with the financial statements for a couple of favorite companies in hand to make the application of the ratios more relevant. Working your way through the jungle of numbers and verbiage for a company an investor owns with a few of Temple's ratios will contribute to an informed opinion of that business.

IMHO, *Magic Numbers* is one of the greatest finance books that I'm aware of (and I am aware of many of them). I agree with the positive reviews that have been written already. Rather than be repetitive, I wanted to add the following observations:

(1) The earliest reviewer mentioned that there were serious errors/typos in this book. That WAS true. However, reprintings of this book from Spring of 2002 onwards have incorporated corrections to the errors mentioned. So any new copy you buy here should be free of the errors that the first reviewer mentioned.

(2) One of the best features of this book - which distinguishes this book from other books of this type - is that it actually goes through the calculation of the ratios/numbers step-by-step. Better yet, these calculations are made from real financial statements from real companies (mostly in the UK or Asia). While other books will tell you the theory of how to arrive at a figure and maybe offer up a 'toy' example, *Magic Numbers* actually gives the reader solid, concrete, real-life, practical examples of how to arrive at the 'magic numbers.'

Peter Temple's MAG1C NUM8ERS is a straightforward introduction and useful reference tool for the serious investor on this topic. At the core of fundamental analysis are financial ratios that are essentially measuring tools for reaching a better understanding of a company's strengths and weaknesses. Temple's book manages to take some of the mystery out of these 'magic' numbers by assembling them in one place. Here we have an organized summary of thirty-three key financial ratios. With each one we get a) a definition b) the formula c) where we can find the numbers d) how the ratio can be calculated e) a specific corporate example and f) what relevance the measurement has for investors. The predictable organization of the book means it is an easy reference to flip open when we need to refresh our understanding of a useful ratio. Temple's observations about applying particular ratios to specific kinds of companies are helpful. I, for one, would like to have received more help in this area. Temple is British and many of his examples are drawn from companies US investors will not warm-up to such as Singapore Telecom, UK retailer Kingfisher, or the German utility company RWE. I'd recommend reading the book with the financial statements for a couple of favorite companies in hand to make the application of the ratios more relevant. Working your way through the jungle of numbers and verbiage for a company in which you have an investment with a few of Temple's ratios will contribute to an informed opinion of that business.

The book is a no-nonsense reference manual for all Investors who are serious about value-investing and analysis of common stock based on metrics. For newbies, the book explains in a methodical way to calculate the ratios, while for expert investors, it acts as a primer.

The 33 ratios have been carefully selected and these are the ratios what you would need to analyze a common stock.

The examples, though, are UK and Asia- based. It would have been great if the author would have taken more American examples and financial statements done on American GAAP.