- Paperback: 768 pages
- Publisher: Ivo Welch; 2nd edition (2011)
- Language: English
- ISBN-10: 0984004955
- ISBN-13: 978-0984004959
- Product Dimensions: 11 x 8.5 x 1.2 inches
- Shipping Weight: 4.4 pounds
- Average Customer Review: 4.6 out of 5 stars See all reviews (34 customer reviews)
- Amazon Best Sellers Rank: #219,285 in Books (See Top 100 in Books)
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Corporate Finance Paperback – 2011
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This second edition maintains the approach of building up explanations from the simplest to ever-more complex scenarios. For example, rates of return, present values, and the law of one price are first explained in a world of certainty; then in a world with risk but no risk premium; followed by a world in which higher risk comes with higher expected returns; and finally in a world with imperfect markets. Numerical examples take center stage. Each step is easy. Students learn why the fundamentals make sense. That is, this book teaches not only the traditional finance canon, but also how to think in financial terms. This book is both more advanced and easier to understand than its competitors.
Other Book Highlights:
Its focus is valuation. Thus, it contains novel chapters about how to read financial statements from a finance rather than an accounting perspective, how to use comparables, and how to construct pro formas.
It consistently emphasizes the difference between the default (credit) premium and the risk (aversion) premium. Stated rates of return are always higher than expected rates.
It is honest about what financiers do and do not know. It shows where mistakes are forgivable and where they are not.
It features many small innovations. For example, an NPV checklist prevents common errors. The relation between tax-adjusted APV, WACC, and other perfect-market violations is demystified. The capital structure chapters explain how non-financial liabilities can finance the firm (and break M&M), how firms should act if financial markets are not efficient, and how stock returns greatly influence debt-ratio variation.
Chapters not normally covered in a first course are laid out in a (free) companion. In this sense, this book is more like a “Fundamentals” version, albeit included free.
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Top customer reviews
1) There are a lot of good Corporate Finance/General Finance textbooks out there. For most of those books, they discuss finance in the order of financial statement analysis, time value of money, stocks and bonds, capital budgeting, efficient markets, etc. This book by Ivo Welch approaches finance in a different way. It begins with perfect market as a foundation, then add imperfect market and other finance topics after a good foundation is built. Since most students already use one of those other books in their 300 level finance class, this book could be a good option for 400 level and MBA level finance classes.
2) I really like the discussion of promised rate Vs. expected rate. This part of the discussion is the best among all the great finance book. The way Dr. Welch discuss the different layers of risk is also insightful.
3) The testbank (online quiz center) is a very neat tool. Dr. Welch provides questions for each chapter, and professors can choose the exact questions for the class assignments. In addition, professors can also make their own questions. It might take a little time to figure out how to add questions to the testbank, but it is really not too difficult.
4) Again, about this testbank. Numbers in most of the testbank questions are automatically updated every time students work on them. What I did was that I let students take unlimited attempts so that they can work on the questions repeatedly until they figure them out. Students' feedback to me indicates they LOVE this testbank system.
5) Last but not least, the price of this book is a bargain.
Main strengths of the book:
Uncertainty, Default and Risk (==> Better done than other books. A clear distinction between Expected and Promised Cash Flows)
Capital Budgeting Applications and Pitfalls (The NPV Checklist) (==> Brilliant and useful)
From Financial Statements to Economic Cash Flows (==>A nice review of the Indirect Method approach to Cash Flows)
Pro Forma Financial Statements (==>Well done, although i would like to see a more consistent treatment of Financial Statements Forecasting for valuation purposes using the Direct Method)
Valuation from Comparables and Some Financial ratios (==> Better done than other books)
Taxes and Capital Structure
More Imperfect Market Capital Structure
The greatest strenght of the book is the progression from the perfect market, LOP world to an imperfect market, constructing numerical examples in order to teach real problem solving.
JUAN CARLOS GUTIÉRREZ