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All magic is based on illusion, and
these magic numbers are no exception. They are presented as the essential
ratios and calculations required to assess the health of companies prior to investment
decisions. All the calculations are based on figures which Temple describes as objective
but which he concedes include accounting distortions which must be stripped out
and admits that the numbers can be fudged, smoothed and manipulated. Price
doesnt lie, but accountants and auditors figures have a very poor
history of accuracy.
Despite this, the book is an
excellent coverage of the 33 key ratios and calculations used by investors and fund
managers. This book should be in the library of every one of them as it explains the
concepts clearly and accurately. It is a very good reference book.
It groups these ratios into five
sections - Market based numbers; Income
numbers; Balance sheet numbers; Cash flow numbers; and risk, return and volatility
numbers. It is this final grouping that is of most interest to traders.
Each set of numbers contains a definition, where to find the
necessary information, a theoretical example of the calculation, a practical example, and
a short section of the significance of the number.
This is a basic reference book for
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