1173 Posts Found

Modern portfolio theory is the philosophical opposite of traditional stock picking. It is the creation of economists, who try to understand the market as a whole, rather than business analysts, who look for what makes each investment opportunity unique. Investments are described statistically, in terms of their expected long-term return rate and their expected short-term volatility. The volatility is equated with “risk”, measuring how much … [ Read more ]

Content: Article | Source: moneychimp | Subject: Finance | Industry: Investing

Discounted cash flow valuations are the best way to assess the value of projects, but they are only as accurate as the forecasts behind them. A careful review of a company’s multiples–and those of its competitors–can help verify those underlying forecasts. However, executives must be critical consumers of published multiples and probe unexpected differences.

Content: Article | Authors: David Wessels, Marc H. Goedhart, Tim Koller | Source: McKinsey Quarterly | Subject: Finance

Accounting is often seen as a veil, a mere detail of measurement that does not affect the economic fundamentals of a firm. However, the intensity of the public debate surrounding accounting reforms in recent years suggests that there may be more at stake than obscure debates on measurement. Currently, attention is focused on the initiative of the International Accounting Standards Board (IASB) and the U.S. … [ Read more ]

Content: Article | Authors: Guillaume Plantin, Haresh Sapra, Hyun Song Shin | Source: Capital Ideas | Subjects: Accounting, Finance

A look at the basics of stock and options granting for entrepreneurs.

Content: Article | Author: Joseph G. Hadzima Jr. | Source: Boston Business Journal | Subjects: Entrepreneurship, Finance

An important and often overlooked aspect of operational excellence is regularly comparing actual costs to budget assumptions – not just the numbers in the plan. Understanding assumption deviations will help improve the accuracy of future forecasting.

Content: Quotation | Source: Kiss Theory Good Bye | Subjects: Finance, Operations

Matt Evans has gathered a nice collection of free excel files to download from various sources across the web.

Editor’s Note: thanks to financeprofessor.com (via MoneyScience) for pointing out this site…

Content: Online Resource | Author: Matt H. Evans | Subjects: Finance, Free Stuff / Tools

Dramatic stock market gyrations during and since the 1990s have encouraged advocates of behavioral-finance theories, which hold that market values can systematically deviate from economic fundamentals. Evidence shows, however, that such events are limited and that market values eventually return to fundamental levels.

Content: Article | Authors: David Wessels, Marc H. Goedhart, Tim Koller | Source: McKinsey Quarterly | Subject: Finance

FinanceProfessor.com has a post discussing how useful the new FMA Online site is, specifically referencing a video by Professor Cliff Smith of the University of Rochester. Includes relevant links.

Content: Article | Author: James Mahar Jr. | Source: FinanceProfessor.com | Subjects: Corporate Governance, Finance

The rate at which dollars are exchanged for euros impacts our daily lives. So, it’s no surprise that this and other currency fluctuations are studied and debated. What could be called the “classical approach” attributes changes in the exchange rate to changes in GDP and other such variables. Yet, Meese and Rogoff overturned this theory in 1983 by showing that exchange rate changes are unpredictable. … [ Read more ]

Content: Article | Authors: Miguel Ángel Ariño, Miguel Ángel Canela | Source: IESE Insight | Subjects: Finance, International

Desai’s case studies provide readers with a unique perspective in the field of international corporate finance. His cases will help them understand international financial markets, including the instruments and techniques used in the foreign exchange market, monetary policy and international asset allocation. With the help of practical examples, readers will also examine the decision-making that goes into formulating an appropriate foreign exchange hedging strategy, how … [ Read more ]

Content: Book | Author: Mihir A. Desai | Subjects: Finance, International

Jim Mahar (FinanceProfessor.com) gives an overview of the article, Growth Options, Beta, and the Cost of Capital by Antonio Bernardo, Bhagwan Chowdry, and Amit Goyal which “looks at the betas of firms’ assets in place relative to the betas of their growth options and finds that the growth options have significantly higher betas. The authors then show that this difference in betas can lead to … [ Read more ]

Content: Article | Author: James Mahar Jr. | Source: FinanceProfessor.com | Subject: Finance

How can a company manage for value? By carefully applying and interpreting the numbers in formulating and executing value-based strategies. That according to a managing partner at Stern Stewart & Co., the firm that developed and has perfected one of the more favoured measures for determining value, Economic Valued Added (EVA). In the article, he first describes why managers are too often drawn to … [ Read more ]

Content: Article | Author: Justin Pettit | Source: Ivey Business Journal | Subjects: Finance, Management

They say the four words “This time is different” are the four most dangerous words in finance because usually this time is not different. History does often repeat itself.

Content: Quotation | Source: Ivey Business Journal | Subjects: Economics, Finance

It took a revolution in the field of finance to produce the theories and techniques that make possible today’s sophisticated markets. This revolution started in the 1950s inside the heads of a few dozen economists, mathematicians, statisticians, and physicists working at universities and consulting firms. Modern quantitative finance came of age between the 1970s and 1990s, but is only reaching full maturity now. With the … [ Read more ]

Content: Article | Author: Rob Norton | Source: strategy+business | Subjects: Economics, Finance

Most examinations of stock buybacks find that the management is conveying information to the market about the relative valuation of the firm. Thus, buybacks are seen as good signals and the price tends to increase at the time of the announcement and (at least according to some authors) continue to outperform in the months following the buyback announcement.

Massa, Rehman, and Vermaelen extend this research by … [ Read more ]

Content: Article | Author: James Mahar Jr. | Source: FinanceProfessor.com | Subject: Finance

Companies suffer from “embedded unprofitability,” says Jonathan Byrnes. Time for CFOs to build grassroots profitability management processes into their companies’ core management activities.

Content: Article | Author: Jonathan Byrnes | Source: Harvard Business School (HBS) Working Knowledge | Subjects: Finance, Management

This is a question more and more companies have been asking. Many of the traditional advantages of being public are no longer valid, and the mounting costs all the more obvious.

Content: Article | Author: Joseph Fuller | Source: Monitor Group | Subjects: Corporate Governance, Finance

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Profit is an incomplete measure that ignores capital and is inappropriate for making the many business decisions that trade off between income statement and balance sheet. Tied to incentive compensation, this can lead to dysfunctional behaviour among managers.

Content: Quotation | Source: Ivey Business Journal | Subject: Finance

We often find that improper costing of fixed costs and capital, such as the cost of capacity, creates misleading signals of performance and value in a business’s portfolio. First, traditional costing systems today ignore the cost of capital. Second, the treatment of excess capacity is often incorrectly treated as a unit cost, instead of the period expense that it truly is.

Indirect overhead costs are often … [ Read more ]

Content: Quotation | Source: Ivey Business Journal | Subjects: Accounting, Finance