October 14, 2010

Sense and Nonsense in Corporate Finance

Sense and Nonsense in Corporate Finance
An Antidote to Conventional Thinking About LBOs, Capital Budgeting, Dividend Policy, and Creating Shareholder Value
By: Louis Lowenstein
271 pp.
Addison-Wesley 1991
Review by: Lydia Morris Brown

Beginning with a set of 12 financial rules that reflects the harsh lessons of the 1980s, Lowenstein brings purpose and good sense to corporate finance. The book follows two fictional business executives (a CEO and a CFO) as they deal with the financial problems of an American corporation. Sense and Nonsense in Corporate Finance provides tools and an analytic framework for answering such questions as when to raise money, when to pay it out, and how to invest and spend it. Although a useful discipline, it is not nearly as powerful and all encompassing as the claims of recent years would have us believe. Corporate finance, rather than providing a disciplined, scientific, foolproof approach to capital investments, leaves the really difficult problems unanswered.

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