TITLE : TECHNIQUES OF FINANCIAL ANALYSIS. 6TH ED.

This book gives the student, analyst, or business executive a concise, practical, usable, and up-to-date overview of the key financial analysis tools needed to understand financial reports, develop basic financial projections, evaluate capital investment decisions, assess the implications of financing choices, and derive the value of a business or a security. The techniques and measures are clearly described and demonstrated in the context of the underlying financial concepts, yet without delving into theoretical abstraction. Self-study exercises and problems are provided after each chapter so the reader can practice applying the analytical tools. The materials are discussed from a decision-making point of view which takes into account that in a going business, investment, operational, andfinancing decisions are linked and interrelated. The presentation also takes into account the viewpoints of the major parties interested in the performance of a business: managers, owners, and creditors. Practicality is paramount, however, and issues and concepts beyond the essentials are left to the more specialized texts and articles identified in the references.

Originally published almost 25 years ago, the book has maintained a unique appeal for both students and practitioners because of its clarity and common sense presentation. An outgrowth of the compact technical briefing materials used in the MBA program at the Harvard Business School, which supplement practical case study discussion with essential background, the book has been regularly updated every five years. The sixth edition reflects not only the latest practice in the use of the various financial techniques, but also the experience gained over five editions through the widespread use the book continues to enjoy in both university courses, graduate and undergraduate, and in hundreds of executive development seminars and in-company programs in the United States, Canada, and overseas. Translated into five foreign languages over the years, the book has transcended the confines of American business practice on which it is built, because the way the analytical methods are described makes them almost universally applicable.

This sixth edition has been completely rewritten to further improve the integration of all the materials. The first four chapters form a unified section that covers basic financial statement analysis, funds flow patterns and their impact on liquidity, basic financial projection techniques, and culminates in an integrated model of business, e.g., a dynamic system affected by operating and financial leverage and by management's business strategies and financial policies.

Chapters 5 through 8 cover the more specialized topics of capital investment analysis, cost of capital and return standards, the choice among long-term financing alternatives, and valuation of a business and its securities, including basic concepts of merger and acquisition values. The chapters on cost of capital and valuation are new additions, necessary to reflect recent developments in corporate financial theory and practice. Three appendixes have also been added: a brief overview of inflation concepts, a description of basic financial information sources and financial quotations (formerly the final chapter), and solutions to more than two thirds of the self-study exercises and problems accompanying every ehapter. This last feature now makes the book truly self-contained for the student or practitioner wishing to test his or her understanding of the materials.

The complete revision of the book has left intact, however, the book's primary focus on the doable and practical-an executive briefing" concept-and on building the reader's basic ability to grasp financial relationships and issues. As before, the book only presupposes that the reader has some familiarity with fundamental accounting concepts.

I would again like to express my appreciation to my former colleagues at the Harvard Business School for the opportunity to develop the original concept of the book. My thanks also go to my business associates and to my colleagues at universities and in executive development programs here and abroad, too numerous to mention individually, for their continued extensive use of the book and for the many expressions of interest and constructive suggestions that have supported the book's evolution. Finally, I continue to be most gratified by the positive responses from so many users at all levels of experience who have found the book truly helpful.

Erich A. Helfert