Analysis for Financial Management

Cover
Analysis for Financial Management
Dedication
Brief Contents
Contents
Preface
Part One: Assessing the Financial Health of the Firm
	Chapter 1: Interpreting Financial Statements
		The Cash Flow Cycle
		Overview of Financial Statements
		The Balance Sheet
			Current Assets and Liabilities
			Shareholders' Equity
		The Income Statement
			Measuring Earnings
		Sources and Uses Statements
			The Two-Finger Approach
		The Cash Flow Statement
		Financial Statements and the Value Problem
			Market Value vs. Book Value
			Economic Income vs. Accounting Income
			Imputed Costs
		Summary
		Additional Resources
		Problems
	Chapter 2: Evaluating Financial Performance
		The Levers of Financial Performance
		Return on Equity
			The Three Determinants of ROE
			The Profit Margin
			Asset Turnover
			Financial Leverage
		Is ROE a Reliable Financial Yardstick?
			The Timing Problem
			The Risk Problem
			The Value Problem
			ROE or Market Price?
		Ratio Analysis
			Using Ratios Effectively
			Ratio Analysis of Polaris Inc.
		Summary
		Additional Resources
		Problems
Part Two: Planning Future Financial Performance
	Chapter 3: Financial Forecasting
		Pro Forma Statements
			Percent-of-Sales Forecasting
			Interest Expense
			Seasonality
		Pro Forma Statements and Financial Planning
		Forecasting with Spreadsheets
		Coping with Uncertainty
			Sensitivity Analysis
			Scenario Analysis
			Simulation
		Cash Flow Forecasts
		Cash Budgets
		The Techniques Compared
		Summary
		Additional Resources
		Problems
	Chapter 4: Managing Growth
		Sustainable Growth
			The Sustainable Growth Equation
		Too Much Growth
			Balanced Growth
			DLH Holdings' Sustainable Growth Rate
			ÒWhat IfÓ Questions
		What to Do When Actual Growth Exceeds Sustainable Growth
			Sell New Equity
			Increase Leverage
			Reduce the Payout Ratio
			Profitable Pruning
			Outsourcing
			Pricing
			Is Merger the Answer?
		Too Little Growth
		What to Do When Sustainable Growth Exceeds Actual Growth
			Ignore the Problem
			Return the Money to Shareholders
			Buy Growth
		Sustainable Growth and Pro Forma Forecasts
		New Equity Financing
			Why Don't U.S. Corporations Issue More Equity?
		Summary
		Additional Resources
		Problems
Part Three: Financing Operations
	Chapter 5: Financial Instruments and Markets
		Financial Instruments
			Bonds
			Common Stock
			Preferred Stock
		Financial Markets
			Venture Capital Financing
			Private Equity
			Initial Public Offerings
			Seasoned Issues
			Issue Costs
		Efficient Markets
			What Is an Efficient Market?
			Implications of Efficiency
		Appendix: Using Derivatives to Manage Risks
			Forward Markets
			Hedging with Forward Contracts
			Hedging with Futures Contracts
			Types of Forwards and Futures
			Hedging with Swaps
			Interest Rate Swaps
			Currency Swaps
			Hedging with Options
			Limitations of Financial Market Hedging
			Valuing Options
		Summary
		Additional Resources
		Problems
	Chapter 6: The Financing Decision
		Financial Leverage
		Measuring the Effects of Leverage on a Business
			Leverage and Risk
			Leverage and Earnings
		How Much to Borrow
			Irrelevance
			Tax Benefits
			Distress Costs
			Flexibility
			Market Signaling
			Management Incentives
			The Financing Decision and Growth
		Selecting a Maturity Structure
			Inflation and Financing Strategy
		Appendix: The Irrelevance Proposition
			No Taxes
			Taxes
		Summary
		Additional Resources
		Problems
Part Four: Evaluating Investment Opportunities
	Chapter 7: Discounted Cash Flow Techniques
		Figures of Merit
			The Payback Period and the Accounting Rate of Return
			The Time Value of Money
			Equivalence
			The Net Present Value
			The Benefit-Cost Ratio
			The Internal Rate of Return
			Uneven Cash Flows
			A Few Applications and Extensions
			Mutually Exclusive Alternatives and Capital Rationing
			The IRR in Perspective
		Determining the Relevant Cash Flows
			Depreciation
			Working Capital and Spontaneous Sources
			Sunk Costs
			Allocated Costs
			Cannibalization
			Excess Capacity
			Financing Costs
		Appendix: Mutually Exclusive Alternatives and Capital Rationing
			What Happened to the Other $578,000?
			Unequal Lives
			Capital Rationing
			The Problem of Future Opportunities
			A Decision Tree
		Summary
		Additional Resources
		Problems
	Chapter 8: Risk Analysis in Investment Decisions
		Risk Defined
			Risk and Diversification
		Estimating Investment Risk
			Three Techniques for Estimating Investment Risk
		Including Risk in Investment Evaluation
			Risk-Adjusted Discount Rates
		The Cost of Capital
			The Cost of Capital Defined
			The Cost of Capital for Polaris
			The Cost of Capital in Investment Appraisal
			Multiple Hurdle Rates
		Four Pitfalls in the Use of Discounted Cash Flow Techniques
			The Enterprise Perspective vs. the Equity Perspective
			Inflation
			Real Options
			Excessive Risk Adjustment
		A Cautionary Note
		Appendix: Asset Beta and Adjusted Present Value
			Calculating Asset Beta
			Using Asset Beta to Estimate Equity Beta
			Asset Beta and Adjusted Present Value
		Summary
		Additional Resources
		Problems
	Chapter 9: Business Valuation and Corporate Restructuring
		Valuing a Business
			Assets or Equity?
			Dead or Alive?
			Minority Interest or Control?
		Discounted Cash Flow Valuation
			Free Cash Flow
			The Terminal Value
			A Numerical Example
			Problems with Present Value Approaches to Valuation
		Valuation Based on Comparable Trades
			Lack of Marketability
		The Market for Control
			The Premium for Control
			Financial Reasons for Restructuring
		The Empirical Evidence
		The LinkedIn Buyout
		Appendix: The Venture Capital Method of Valuation
			The Venture Capital Method-One Financing Round
			The Venture Capital Method-Multiple Financing Rounds
			Why Do Venture Capitalists Demand Such High Returns?
		Summary
		Additional Resources
		Problems
Glossary
Suggested Answers to Odd-Numbered Problems
Index