Preface
Unique Pedagogical Style
This text is written so that the reader can absorb relatively small bytes of information at a time without ever feeling overwhelmed. Each page is short and has a unique topical heading on which the student can focus and easily retain. The paragraphs are kept short, just as you will note they are on this page, to enable the reader to pause, take a breath, and review in his/her mind what s/he just read before going on. Occasionally, concepts and explanation are repeated in consecutive paragraphs in order to present an idea from multiple perspectives and to deepen one’s comprehension.
The writing style attempts to avoid jargon, except where necessary. In such cases, the terminology is explained so that the reader may proceed with clarity. Still, there are many words and phrases that one must acquire in Finance. At times, vocabulary words are highlighted in the margins.
Readers are advised to simultaneously press on the “CTRL” and “F” buttons at which time a window will open in which a search word may be entered. This will enable the reader to go back and review concepts at will.
The chapters are organized and written so that the reader get directly to the point, without unnecessary information and “fluff.” There is a certain flow to the chapters and sections within the chapters that is intended to make learning smooth and enjoyable.
Concepts and Computations
Financial Analysis, by and large, incorporates Accounting concepts. Thus, it is imperative that the analyst understand the numbers, which s/he will utilize in his/her analysis. This text exposes the reader to the many shortcomings in reading Financial Statements. No prior knowledge of Accounting is assumed. The text, in its early chapters, will tenderly lead the reader through the arcane world of Accounting and point out the many shortcomings in reading the statements and in conducting elementary Financial Analysis.
The reader should have some facility with very basic Algebra, in particular, s/he should be able to solve for an unknown in a simple formula, to be able to transpose a value from one side of an equation to the other, and to be to calculate exponents and roots. The text will make Algebra easy by showing, where necessary, the correct solutions step-by-step.
The text will proceed to Ratio Analysis, the very basic tools of financial analysis, incorporating the previously learned Accounting data. It will then proceed to the notion of the Time Value of Money, which is the central concept in all of finance. The text will conclude with Stock and Bond Valuation, which are based on all the previous information of the text. Thus, the reader will build upon his/her knowledge by going from concept to concept in smooth, linear fashion, ever reaching for higher and higher planes of knowledge.
The Nuances of Financial Analysis
Financial Analysis, at the end of the day, is just common sense, or common business sense. Financial and Mathematical principles must conform to the realities of the field and not the other way around. The mathematics are a tool and not an end. In a sense, a financial analyst is bi-lingual; a student will translate financial principles into formulae when advised and can explain in plain English the meaning and application of such formulae when first presented with one. It is all supposed to make sense. This book tries to capture this dual and essential nature of Finance. As the reader goes through the text, s/he should increasingly gain a sense of empowerment, confidence, and mastery of the subject.
Quotations
The text is replete with quotations from an eclectic myriad of sources including the Bible, the Talmud, great Greek philosophers, famous politicians, modern and popular thinkers from the 18th century onward, and more. The quotations are not intended to postulate or promote a point-of-view, especially where religion is concerned, but instead to inspire the reader to persevere in his/her study, to continue toward the achievement of great heights, and to always consider the social impact of his/her actions. Mastery of Finance presents a person with the opportunity to better oneself in so many ways while simultaneously bettering society-at-large. And that is very cool.
Problem-solving
In virtually each chapter and ends-of chapters, the reader will find formulae to be solved, tables that need to be filled-in, and occasional diagrams to be drawn. The intent is to make the material come alive so that the student can both learn and test him/herself in the process. Solutions are generally provided to all these fill-ins so that the reader may verify whether s/he resolved the problem correctly and may correct any errors in so doing.
Forthcoming in Dr. Bigel’s Basic Finance Series:
Corporate Finance
Securities Markets and Instruments
Introduction to Fixed Income Mathematics
