deletions | additions       diff --git a/introduction.tex b/introduction.tex  index 4fc8650..bf02223 100644  --- a/introduction.tex  +++ b/introduction.tex 
...
\section{Introduction}  In a prior working paper, Pierre and al. have shown how to build a stock selection framework based on the profitability of a firm and its stock price valuation. This Profitability-Valuation framework is derived from the Residual Income Model (hereafter \textit{RIM}) which is in fact a derivation of the Dividend Discount Model (hereafter \textit{DDM}). In this context, Pierre and al. show that profitability is necessarely measured using Return On Equity (hereafter \textit{ROE}) while the valuation metric is necessarely the Price To Book (hereafter \textit{PB}). As such, screening for stocks using ROE and PB consists in buying stocks that appear cheap from a dividend perspective or, more generally from an earnings perspective. En effet, dividends can Dividends can, indeed,  be replaced by earnings as long as the clean surplus accounting rule that underpins the RIM is observed. \\  \\ Drawbacks of the dividend or earnings approach to valuation are well known. For example, earnings are a pure accounting measure that can be manipulated because it incorporates non-cash items of the income statement. Another drawback often mentioned by practitioners is that profitability measures based on earnings depend on a firm's gearing, defined as the amount of debt relative to equity. A company can have an attractive \textit{ROE} despite having an unattractive Return on Invested Capital (hereafter \textit{ROIC}). More importantly, a company using financial leverage to enhance its \textit{ROE} actually makes it more volatile often at the expense of its financial strength (measured by the health of the balance sheet). For these reasons, practitioners in the equity investment community tend to prefer cash-flow based valuation metrics.  \\