Good Books for General Finance Terminology/Concepts
Hey guys
I am currently a finance major but I won't get any classroom exposure to general finance until Spring semester am looking to expand my knowledge in Finance as far as terminology and concepts go so I can better prepare for technical interviews when the time comes and also just for personal knowledge as well. A lot of people have been telling me a good start would be Graham's "The Intelligent Investor" and "Investment Banking" by Pearl and Rosenbaum.
Do you guys happen to know any other great books for finance concepts and terminology?
I wouldn't start with Graham if you're just getting familiar with financial terms, nor would I start with Rosenbaum and Pearl. Start by picking up a simple accounting book and familiarizing yourself with the terminology first. You aren't going to understand Rosenbaum and Pearl if you can't even read a balance sheet.
Next, get -the- finance textbook: Principles of Corporate Finance by Brealey, Myers, and Allen. It's used as the de-facto intro finance textbook in a lot of university courses. For slightly more advanced corpfin stuff, check out Analysis of Financial Statements (Higgins) and, if you're interested in the investing side, Investments (by Bodie, Kane, Marcus) and Options, Futures, and Derivatives (Hull).
I would approach it in the following manner:
A - Get the simplest intro to accounting book you can find. (1) Understand what the financial statements are, what they measure and how they work / link. (2) Understand basic ratio analysis (esp. DuPont analysis). No need to worry about the specific GAAP & IFRS standards and the differences between them at this stage.
B - Read "Corporate Finance and Investment: Decisions and Strategies"by Pike and Neale from cover to cover. You will have the basics of Corporate Finance and Equity Investments. I had used this instead of Brealey & Myers. After reading this intro book you should be able to follow everything in Graham and in Rosenbaum & Pearl.
C - The other books Chica refers to are great. Investments (by Bodie, Kane, Marcus) is the next logical step in my opinion after reading Pike & Neale (or Brealey & Myers) if you want to understand investment theory (some sections overlap / expand on Pike & Neale and some will be new like Fixed Income). Alternatively, you might want to read Rosenbaum & Pearl if you are more keen on understanding what investment bankers do as your degree will cover investments in due course.
A different take... If you want to cut to the chase and go straight to the equations check out "Investment Mathematics" by Adams, Booth, Bowie & Freeth. Don't let the title scare you. This is the only text that I know of that goes from the maths behind simple / compound interest to equity, bond, currency and futures valuation and some discussion of option valuation, MPT and ARCH/GARCH without having to know advanced calculus & linear algebra... i.e. assumes you are a maths novice.
It won't turn you into a financial maths superstar engineer, but you'll know the limitations of the models that are taught in the other books, because you'll understand the assumptions that are behind the maths...
I agree with chic. Definitely start with some accounting.
Corporate Finance by Ross, Westerfield, and Jaffe is a really good one too. It starts out with a solid intro to financial statements so you could actually go straight to that book if you're so inclined.
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