index

- Why you should read this book
- Our Special Letter to Korean Readers
- Translator's Foreword
- Recommendations

PART 1: The Basics: Starting a Business, Financial Statements, and Common Stock
BASICS: STARTING A BUSINESS, FINANCIAL STATEMENTS, AND COMMON STOCK

Chapter 1: Starting a Business
Chapter 1 briefly explains the company's founding process and introduces basic financial statement-related terminology.

Chapter 2: Ownership and Stock
Explains how a company raises the capital it needs from investors, how the company is established, and how shares are allocated.

Chapter 3: Borrowing Money as the Company Grows
Explains basic terms related to liabilities and the process by which new accounting items are added to the balance sheet.

Chapter 4: Ratios Investors Watch
Explains the importance of 21 financial ratios, including a company's profitability ratio, financial soundness ratio, and liquidity ratio, as well as earnings per share (EPS).

Chapter 5: Going Public - Primary and Secondary Offerings
Explains the basic concepts of listing, the reasons why a company goes public, the differences between new share offerings and existing share sales, and the concept of an initial public offering (IPO).

Chapter 6: Earnings Dilution and JMC's IPO (EARNINGS DILUTION - JMC GOES PUBLIC)
Chapter 6 explains the concept of diluted earnings per share and covers stock splits and the process of a company going public.

PART 2 Securities Other Than Common Stock: Bonds and Preferred Stock
SECURITIES OTHER THAN COMMON STOCK: BONDS AND PREFERRED STOCK

Chapter 7: Financing Growth: Selling New Stock vs. Selling New Bonds
Chapter 7 discusses how a company should choose to raise the additional funds it needs: issuing stock, which dilutes its earnings, or issuing bonds, which reduce its earnings due to high interest expenses.

Chapter 8: Bonds
Bonds are generally considered loans, and differences between different types of bonds affect their value.
Chapter 8 will explain the differences between a bond's coupon rate, current yield, and yield to maturity.
Understanding bond priorities, bond ratings, and other bond features will help investors select investments from among the many bonds available.

Chapter 9: Why Bonds Go Up and Down
Bond prices and yields respond to changes in current interest rates and the credit rating of the company issuing the bond.
In Chapter 9, we will examine the yield curves for U.S. Treasury yields and other interest rates.
The yield curve spread can help assess whether bond prices are high or low.

Chapter 10: Bonds: Advanced Topics
Chapter 10 provides a more complete understanding of bonds by covering additional features and restrictions on bonds, such as "call" and "refunding" provisions, and explains zero coupon bonds and "resets."

Chapter 11: Convertible Bonds
Convertible bonds are similar to other ordinary bonds except that they can be converted into common stock.
In Chapter 11, we will examine how the conversion feature of convertible bonds differentiates them from ordinary bonds and how convertible bonds affect the earnings reported in the income statement.
And it explains basic earnings and diluted earnings.

Chapter 12: Preferred Stock
Chapter 12 covers the fixed dividends of preferred stock and the differences between common stock and preferred stock.

Chapter 13: Convertible Preferred Stock
Chapter 13 explains how convertible preferred stock is converted and how it affects earnings per share.

PART 3 THE COMPANY'S ASSETS AND CASH FLOW
COMPANY ASSETS AND CASH FLOW

Chapter 14: Fixed Assets, Depreciation, and Cash Flow
Chapter 14 covers how companies should address the direct impact of depreciation of corporate assets on shareholders' profits, as well as key concepts of cash flow.

Chapter 15: Cost Versus Expense, Capitalizing Assets, and Write-Offs
The many accounting and investment-related terms introduced in Chapter 15 will elevate readers' understanding and equip them to engage in more advanced investment discussions.

Chapter 16: Cash Flow
Cash flow is different from earnings.
Understanding this difference will help investors understand financial statements and develop the ability to distinguish between good and troubled stocks.
If you properly understand the sources of a company's cash flow and how it is used, you can get a completely different picture than if you simply look at profits.

Chapter 17: Inventory Accounting - Impact on Company Earnings
The cost of inventory cannot be easily determined.
The LIFO or FIFO method that a company uses to calculate the cost and expenses of purchasing inventory can affect its profits for the current year as well as future profits.
Chapter 17 explains when inventory write-downs can cause problems and when they can be buying opportunities.

PART 4: Why Stocks Rise and Fall
WHY STOCKS GO UP AND DOWN

Chapter 18: Price/Earnings and Other Valuation Ratios: When Is a Stock Cheap or Expensive?
The price-to-earnings ratio (P/E) is a key criterion used by investors when evaluating stocks.
We will look at the price-to-earnings ratio in various ways, as well as valuation ratios such as the price-to-cash flow (P/C) ratio, the price-to-sales (P/S) ratio, the price-to-earnings power ratio, and the enterprise value/EBITDA ratio.
The information contained in Chapter 18 will help correct many investors' misunderstandings about stock prices.

Chapter 19: Why Stocks Go Up and Down
In Chapter 19, we'll apply the concepts covered throughout this book to a real-world stock: Abbott Laboratories (NYSE: ABT).
This book will be of great help to investors in understanding the subtle differences that arise when applying the analytical framework covered in this book to actual listed companies.

APPENDIX
- Short selling
- Glossary

- Index

"Why Stocks Go Up and Down," written by Bill Pike, a 30-year veteran portfolio manager at Fidelity Securities, and Patrick Gregory, a finance professor at Babson College who managed a $6.5 billion stock fund, has been a beloved introductory book to stock investing in the United States for 40 years.
The translator of this book, John Choi, also majored in Finance MBA at Indiana University Kelley School and is said to be participating as a co-author in the writing of the follow-up American edition of 'Why Stocks Go Up And Down 4th Edition'.
Unlike many translation investment books on the market, this book is notable for the fact that both the author and translator were directly involved in the production of the Korean edition.

Author Bill Pike says that "Why Stocks Go Up and Down" is "the book you need to understand other investment books," and emphasizes that it is different from other books on investment philosophy in that it provides investors with the practical knowledge they need.
This book explains the process from the company's establishment to its listing through financial statements from the first chapter, covering the financing necessary for company growth and the financial ratios that all stock investors must know.
With individual investors' interest in bonds growing, this book's content on bonds, convertible bonds, and preferred stock investments offers expert knowledge on bonds rarely found in domestic investment books, making it easy to understand.
"Why Stocks Go Up and Down," written by Bill Pike, a 30-year veteran portfolio manager at Fidelity Securities, and Patrick Gregory, a finance professor at Babson College who managed a $6.5 billion stock fund, has been a beloved introductory book to stock investing in the United States for 40 years.
The translator of this book, John Choi, also majored in Finance MBA at Indiana University Kelley School and is said to be participating as a co-author in the writing of the follow-up American edition of 'Why Stocks Go Up And Down 4th Edition'.
Unlike many translation investment books on the market, this book is notable for the fact that both the author and translator were directly involved in the production of the Korean edition.

Author Bill Pike says that "Why Stocks Go Up and Down" is "the book you need to understand other investment books," and emphasizes that it is different from other books on investment philosophy in that it provides investors with the practical knowledge they need.
This book explains the process from the company's establishment to its listing through financial statements from the first chapter, covering the financing necessary for company growth and the financial ratios that all stock investors must know.
With individual investors' interest in bonds growing, this book's content on bonds, convertible bonds, and preferred stock investments offers expert knowledge on bonds rarely found in domestic investment books, making it easy to understand.