This edition of the book emphasizes this theme of challenging market prices. A new chapter, Chapter 7, applies the valuation models of Chapters 5 and 6 as tools for active investing. The process is refined in Part Three of the book after the financial statement analysis of Part Two, for it is this financial statement analysis that elicits the information to evaluate whether market prices are reasonable.

Here are the significant changes for the fifth edition, now running to 20 chapters rather than 19:

New Features:

• New Chapter 7 —“Valuation and Active Investing”—has been added to Part One of the book.
• Chapters 5 and 6: These chapters on valuation have been written more succinctly with some of the material moved to the new Chapter 7.
• Updated Material: Material in all chapters has been updated to incorporate new accounting standards.
• Comparisons between U.S. GAAP accounting and international (IFRS) accounting : These comparisons are made where relevant.
• Revised examples and illustrations: All examples and illustrations have been revised to reflect the latest real-world events, as well as developments within accounting and finance.
• New cases : Cases have been added to a number of chapters and the cases in earlier editions have been updated to 2010.
• End-of-chapter exercises: New exercises have been added.
• Chapter 15 : Chapter 15 (previously Chapter 14) on simple forecasting and valuation has been extensively revised and simplified.
• Chapter 19: Chapter 19 on risk and return in equity investing returns to the theme of active investing

Retained Features:

• Conceptual Framework: This book continues to work from a conceptual framework that helps the student understand how businesses work, how they generate value, and how the value they generate is captured in financial statements.
• Comprehensive end-of-chapter material: Exercises apply methods covered in the chapter and are divided into Concept Questions , Drill Exercises and Applications . Concept Questions reinforce the thinking in the chapter. Drill Exercises are simple and straightforward, and serve to ease the student into the material, while Applications help students to apply a concept they're learning to real business practice. Mini-cases are designed for classroom discussion. These exercises use real-world companies to make different points in different parts of the book.
• Module sections of the text: Each text part is a distinct module, allowing the parts to be taught out of order without inconveniencing the instructor.
• Pedagogical features: Pedagogical features include chapter-opening flow charts, the Analyst's Checklist, and the Analyst's Toolkit. The Web Connection box at the end of each chapter directs students to features on the web page for that chapter, including accounting material. Select end-of-chapter exercises incorporate the Building Your Own Analysis valuation tool on the website.
• Spreadsheets: A comprehensive guide to building spreadsheets—Build Your Own Analysis Product (BYOAP) is on the book's Web site.
• Continuing Case: Kimberly-Clark Corporate is a continuing case study used in the book. At the end of each chapter (through Chapter 16), students receive a new installment of the case which shows how the principles and methods in that chapter are applied to Kimberly-Clark and build on the analysis of previous chapters. By the end, the student will have a demonstration of the application of the book, in total, to one company as a model for other companies.