Book contents
- Frontmatter
- Contents
- List of figures
- Preface
- Acknowledgements
- Section I The five financial building blocks
- Section II The three pillars of financial analysis
- 6 Overview
- 7 The first pillar: Modelling economic value
- 8 The second pillar: Sources of Value
- 9 The third pillar: What sets the share price?
- 10 Conclusion
- Section III Three views of deeper and broader skills
- Appendices Individual work assignments: Suggested answers
- Glossary
- Bibliography
- Index
6 - Overview
Published online by Cambridge University Press: 22 January 2010
- Frontmatter
- Contents
- List of figures
- Preface
- Acknowledgements
- Section I The five financial building blocks
- Section II The three pillars of financial analysis
- 6 Overview
- 7 The first pillar: Modelling economic value
- 8 The second pillar: Sources of Value
- 9 The third pillar: What sets the share price?
- 10 Conclusion
- Section III Three views of deeper and broader skills
- Appendices Individual work assignments: Suggested answers
- Glossary
- Bibliography
- Index
Summary
Where have we got to so far?
Those who started as beginners and who have worked through the first section of this book should have laid down a firm foundation of financial skills. They are now going to be joined by the existing practitioners who only needed to study a few specific parts of the financial foundation section. From now on I will consider all readers as practitioners.
We have in the economic value model a rational means of making tradeoffs between money now and money later. We know, though, that financial decision-making is not a pure science. Our answers are always limited by the assumptions that we make; by the models that we use; and by the context within which we apply them.
This book is primarily about value but the foundations have been spread quite widely. In particular we have been introduced to the main principles of accounting because the financial results of companies are published in this way. We have also looked at planning and control in order to see how financial decisions about projects fit into the wider picture of a company's management processes and strategy.
We have been introduced to the expression ‘words and music’ which should encourage us to seek consistency between the words in our strategy and the financial numbers that we use. Put another way, we have learned that a good decision is a subtle blend of judgement and rational analysis.
- Type
- Chapter
- Information
- Sources of ValueA Practical Guide to the Art and Science of Valuation, pp. 183 - 187Publisher: Cambridge University PressPrint publication year: 2009