Best Corporate Finance Books To Read During Your MBA

A list of six books to grow professionally as an investment banker:

International Taxation in a Nutshell 

Benjamin Franklin said there were only two things certain in life: death and taxes. While on the former we do not have control, we instead can have control over the latter. Indeed, in globalized world taxation has become extremely important, not only within nations but especially for cross-border activities. International Taxation in a Nutshell by  Richard L. Doernberg is a comprehensive introductory guide to the international taxation topic.

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Applied Corporate Finance 

Valuation is more of an art than a science. Assessing the value of a stock or a business can be a very tricky task. What is most difficult is the assessment of the risk of any organization. Indeed, the relationship between risk and reward will help us to determine the worthiness of an investment. But how do we assess risk?

How do we decide what the level of acceptable risk is? What is the reward we are looking to take that risk? Applied Corporate Finance by Aswath Damodaran is definitely among the best Corporate Finance Books. Indeed, the textbook not only gives you a theoretical framework, but most important a practical one. Aswath Damodaran is a professor of finance and equity valuation in the MBA program. He received his MBA and Ph.D. from the University of California at Los Angeles. Thanks to Applied Corporate Finance you will gain insight into the Corporate Finance world.

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Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions

There is no doubt that Investment Banking is the most dynamic, challenging and rewarding profession in the Finance Universe. Although, many do not approach the discipline because they find it overwhelmingly difficult.

Investment Banking has never been so easy thanks to Joshua Rosenbaum and Joshua Pearl’s book “Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions.” The authors rather than be mere professors are practitioners. Indeed, Joshua Rosenbaum is Managing Director at RBC Capital Markets while Joshua Pearl is an investment analyst at Brahman Capital Corp.

The book shows a systematic approach to the discipline from two practitioners with years of experience in the field. Once read the book you will be surprised at the simplicity of the discipline, and you will wonder why you waited for so long before approaching it!

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Security Analysis 

The smartest investor (and billionaire) on earth Mr. Warren Buffet affirmed countless times the necessity to have a robust theoretical framework for investing. Buffet found this framework when he was just 19 years old in the book Security Analysis, by Benjamin Graham and David Dodd. Benjamin Graham, the father of “value investing” together with his partner David Dodd explain the techniques used over their decades as investors.

Benjamin Graham was not a professor who lectured his students; but rather a practitioner that used his firm as a laboratory where experiments were carried out. From Graham’s tests came out Security Analysis, a comprehensive guide on how to outperform the stock market. Benjamin Graham beat the stock market by an annual average of at least 2.5 percentage points for more than two decades.

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 Supply Chain Management

Supply chain management will be among the most significant concerns for any manager which wants to make a difference in the business world. Indeed, in an increasingly competitive world, driving revenues up is not enough anymore.

In today’s world companies must be able to manage their expenses effectively. Managing expenses do not mean to cut costs simply, but rather to get the most out of the organization with the minimum required effort.

For such reason practitioners in the supply chain management field are becoming indispensable and often earn five figure salaries. In this international panorama, Supply Chain Management by Sunil Chopra and Peter Meindi is a practical manual to master the techniques used in the field.

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Excel Bible

Although many software help us today to get the work done, there is no software as useful as Excel. If you want to undertake a career in the financial world, then, Excel will become your best friend. From simple formulas to more advanced functions, up to micros and VBA Excel is a potent tool. And the difference between being a good Excel user to becoming an Expert can make or break a career.

Therefore, to have (almost)guaranteed success in the business/finance world Excel is the access key to the main door. In Excel 2013 Bible, John Walkenbach a.k.a. Mr. Spreadsheet leads us into this fantastic journey of (Excel)discovery.  From the most basic concepts to the most advanced ones, at the end, you will become an expert of the subject.

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Connected Business Concepts

Circle of Competence

The circle of competence describes a person’s natural competence in an area that matches their skills and abilities. Beyond this imaginary circle are skills and abilities that a person is naturally less competent at. The concept was popularised by Warren Buffett, who argued that investors should only invest in companies they know and understand. However, the circle of competence applies to any topic and indeed any individual.

What is a Moat

Economic or market moats represent the long-term business defensibility. Or how long a business can retain its competitive advantage in the marketplace over the years. Warren Buffet who popularized the term “moat” referred to it as a share of mind, opposite to market share, as such it is the characteristic that all valuable brands have.

Buffet Indicator

The Buffet Indicator is a measure of the total value of all publicly-traded stocks in a country divided by that country’s GDP. It’s a measure and ratio to evaluate whether a market is undervalued or overvalued. It’s one of Warren Buffet’s favorite measures as a warning that financial markets might be overvalued and riskier.

Price Sensitivity

Price sensitivity can be explained using the price elasticity of demand, a concept in economics that measures the variation in product demand as the price of the product itself varies. In consumer behavior, price sensitivity describes and measures fluctuations in product demand as the price of that product changes.

Price Ceiling

price ceiling is a price control or limit on how high a price can be charged for a product, service, or commodity. Price ceilings are limits imposed on the price of a product, service, or commodity to protect consumers from prohibitively expensive items. These limits are usually imposed by the government but can also be set in the resale price maintenance (RPM) agreement between a product manufacturer and its distributors. 

Price Elasticity

Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It can be described as elastic, where consumers are responsive to price changes, or inelastic, where consumers are less responsive to price changes. Price elasticity, therefore, is a measure of how consumers react to the price of products and services.

Economies of Scale

In Economics, Economies of Scale is a theory for which, as companies grow, they gain cost advantages. More precisely, companies manage to benefit from these cost advantages as they grow, due to increased efficiency in production. Thus, as companies scale and increase production, a subsequent decrease in the costs associated with it will help the organization scale further.

Diseconomies of Scale

In Economics, a Diseconomy of Scale happens when a company has grown so large that its costs per unit will start to increase. Thus, losing the benefits of scale. That can happen due to several factors arising as a company scales. From coordination issues to management inefficiencies and lack of proper communication flows.

Network Effects

network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

Negative Network Effects

In a negative network effect as the network grows in usage or scale, the value of the platform might shrink. In platform business models network effects help the platform become more valuable for the next user joining. In negative network effects (congestion or pollution) reduce the value of the platform for the next user joining. 

Creative Destruction

Creative destruction was first described by Austrian economist Joseph Schumpeter in 1942, who suggested that capital was never stationary and constantly evolving. To describe this process, Schumpeter defined creative destruction as the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” Therefore, creative destruction is the replacing of long-standing practices or procedures with more innovative, disruptive practices in capitalist markets.

Happiness Economics

Happiness economics seeks to relate economic decisions to wider measures of individual welfare than traditional measures which focus on income and wealth. Happiness economics, therefore, is the formal study of the relationship between individual satisfaction, employment, and wealth.

Command Economy

In a command economy, the government controls the economy through various commands, laws, and national goals which are used to coordinate complex social and economic systems. In other words, a social or political hierarchy determines what is produced, how it is produced, and how it is distributed. Therefore, the command economy is one in which the government controls all major aspects of the economy and economic production.

Animal Spirits

The term “animal spirits” is derived from the Latin spiritus animalis, loosely translated as “the breath that awakens the human mind”. As far back as 300 B.C., animal spirits were used to explain psychological phenomena such as hysterias and manias. Animal spirits also appeared in literature where they exemplified qualities such as exuberance, gaiety, and courage.  Thus, the term “animal spirits” is used to describe how people arrive at financial decisions during periods of economic stress or uncertainty.

State Capitalism

State capitalism is an economic system where business and commercial activity is controlled by the state through state-owned enterprises. In a state capitalist environment, the government is the principal actor. It takes an active role in the formation, regulation, and subsidization of businesses to divert capital to state-appointed bureaucrats. In effect, the government uses capital to further its political ambitions or strengthen its leverage on the international stage.

Boom And Bust Cycle

The boom and bust cycle describes the alternating periods of economic growth and decline common in many capitalist economies. The boom and bust cycle is a phrase used to describe the fluctuations in an economy in which there is persistent expansion and contraction. Expansion is associated with prosperity, while the contraction is associated with either a recession or a depression.

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