McKinsey & Company's #1 best-selling guide to corporate valuation--the fully updated seventh edition
 
Valuation has been the foremost resource for measuring company value for nearly three decades. Now in its seventh edition, this acclaimed volume continues to help financial professionals around the world gain a deep understanding of valuation and help their companies create, manage, and maximize economic value for their shareholders.
 
This latest edition has been carefully revised and updated throughout, and includes new insights on topics such as digital, ESG (environmental, social and governance), and long-term investing, as well as fresh case studies.
 
Clear, accessible chapters cover the fundamental principles of value creation, analyzing and forecasting performance, capital structure and dividends, valuing high-growth companies, and much more. The Financial Times calls the book "one of the practitioners' best guides to valuation."
 
This book:
* Provides complete, detailed guidance on every crucial aspect of corporate valuation
* Explains the strategies, techniques, and nuances of valuation every manager needs to know
* Covers both core and advanced valuation techniques and management strategies
* Features/Includes a companion website that covers key issues in valuation, including videos, discussions of trending topics, and real-world valuation examples from the capital markets
 
For over 90 years, McKinsey & Company has helped corporations and organizations make substantial and lasting improvements in their performance. Through seven editions and 30 years, Valuation: Measuring and Managing the Value of Companies, has served as the definitive reference for finance professionals, including investment bankers, financial analysts, CFOs and corporate managers, venture capitalists, and students and instructors in all areas of finance.

McKinsey & Company's #1 bestselling guide to corporate valuation, now in its Seventh Edition The revised Seventh Edition of Valuation offers detailed, step-by-step explanations of how to easily and effectively measure and manage the value of companies. This book contains proven valuation frameworks that have been used successfully in McKinsey & Company's consulting work, including illustrative case studies that put the spotlight on practical judgments involved in developing and using valuations. PRAISE FOR VALUATION "The book's clarity and comprehensive coverage make it one of the best practitioners' guides to valuation." Financial Times "Valuation. is a reminder of why shareholder value is still the most powerful idea in business and why many criticisms thrown at it are unfair." The Economist "A 'how to' guide for corporate executives who want to get at the unrealized shareholder values trapped in public companies." The New York Times "Cuts through the clutter and confusion to focus executives on what really drives value creation." Fernando Tennenbaum, CFO, AB InBev "Clearly articulates both the principles and practical applications of creating value." John Graham, D. Richard Mead Professor of Finance, Fuqua School of Business, Duke University "The best valuation book just got better. It is required reading for all executives." Benjamin C. Esty, Roy and Elizabeth Simmons Professor of Business Administration, Harvard Business School "The bible in its field. Anyone wanting to understand what drives corporate value should read this latest edition." Dr. Raymond Breu, retired CFO, Novartis A

About the Authors ix
 
Preface xi
 
Acknowledgments xv
 
Part One Foundations of Value
 
1 Why Value Value? 3
 
2 Finance in a Nutshell 17
 
3 Fundamental Principles of Value Creation 27
 
4 Risk and the Cost of Capital 55
 
5 The Alchemy of Stock Market Performance 69
 
6 Valuation of ESG and Digital Initiatives 83
 
7 The Stock Market is Smarter Than You Think 99
 
8 Return on Invested Capital 127
 
9 Growth 155
 
Part Two Core Valuation Techniques
 
10 Frameworks for Valuation 177
 
11 Reorganizing the Financial Statements 205
 
12 Analyzing Performance 239
 
13 Forecasting Performance 259
 
14 Estimating Continuing Value 285
 
15 Estimating the Cost of Capital 305
 
16 Moving from Enterprise Value to Value per Share 335
 
17 Analyzing the Results 357
 
18 Using Multiples 367
 
19 Valuation by Parts 391
 
Part Three Advanced Valuation Techniques
 
20 Taxes 413
 
21 Nonoperating Items, Provisions, and Reserves 427
 
22 Leases 443
 
23 Retirement Obligations 457
 
24 Measuring Performance in Capital-Light Businesses 467
 
25 Alternative Ways to Measure Return on Capital 483
 
26 Inflation 493
 
27 Cross-Border Valuation 507
 
Part Four Managing for Value
 
28 Corporate Portfolio Strategy 527
 
29 Strategic Management: Analytics 547
 
30 Strategic Management: Mindsets and Behaviors 571
 
31 Mergers and Acquisitions 585
 
32 Divestitures 613
 
33 Capital Structure, Dividends, and Share Repurchases 633
 
34 Investor Communications 667
 
Part Five Special Situations
 
35 Emerging Markets 691
 
36 High-Growth Companies 709
 
37 Cyclical Companies 725
 
38 Banks 733
 
39 Flexibility 759
 
Appendix A Discounted Economic Profit Equals Discounted Free Cash Flow 793
 
Appendix B Derivation of Free Cash Flow, Weighted Average Cost of Capital, and Adjusted Present Value 799
 
Appendix C Levering and Unlevering the Cost of Equity 805
 
Appendix D Leverage and the Price-to-Earnings Multiple 813
 
Appendix E Other Capital Structure Issues 817
 
Appendix F Technical Issues in Estimating the Market Risk Premium 823
 
Appendix G Global, International, and Local CAPM 827
 
Appendix H A Valuation of Costco Wholesale 835
 
Appendix I Two-Stage Formula for Continuing Value 859
 
Index 861