Fundamentals of Financial Management

Cover
Brief Contents
Contents
Preface
About the Authors
Part 1: Introduction to Financial Management
	Chapter 1: An Overview of Financial Management
		Putting Things in Perspective
		1-1: What is Finance?
		1-2: Jobs in Finance
		1-3: Forms of Business Organization
		1-4: The Main Financial Goal: Creating Value for Investors
		1-5: Stockholder–Manager Conflicts
		1-6: Stockholder–Debtholder Conflicts
		1-7: Balancing Shareholder Interests and the Interests of Society
		1-8: Business Ethics
		Tying It All Together
	Chapter 2: Financial Markets and Institutions
		Putting Things in Perspective
		2-1: The Capital Allocation Process
		2-2: Financial Markets
		2-3: Financial Institutions
		2-4: The Stock Market
		2-5: The Market for Common Stock
		2-6: Stock Markets and Returns
		2-7: Stock Market Efficiency
		Tying It All Together
		Integrated Case: Smyth Barry & Company
Part 2: Fundamental Concepts in Financial Management
	Chapter 3: Financial Statements, Cash Flow, and Taxes
		Putting Things in Perspective
		3-1: Financial Statements and Reports
		3-2: The Balance Sheet
		3-3: The Income Statement
		3-4: Statement of Cash Flows
		3-5: Statement of Stockholders’ Equity
		3-6: Uses and Limitations of Financial Statements
		3-7: Free Cash Flow
		3-8: MVA and EVA
		3-9: Income Taxes
		Tying It All Together
		Integrated Case: D’Leon Inc., Part I
	Chapter 4: Analysis of Financial Statements
		Putting Things in Perspective
		4-1: Ratio Analysis
		4-2: Liquidity Ratios
		4-3: Asset Management Ratios
		4-4: Debt Management Ratios
		4-5: Profitability Ratios
		4-6: Market Value Ratios
		4-7: Tying the Ratios Together: The DuPont Equation
		4-8: Potential Misuses of ROE
		4-9: Using Financial Ratios to Assess Performance
		4-10: Uses and Limitations of Ratios
		4-11: Looking Beyond the Numbers
		Tying It All Together
		Integrated Case: D’Leon Inc., Part II
	Chapter 5: Time Value of Money
		Putting Things in Perspective
		5-1: Time Lines
		5-2: Future Values
		5-3: Present Values
		5-4: Finding the Interest Rate, I
		5-5: Finding the Number of Years, N
		5-6: Annuities
		5-7: Future Value of an Ordinary Annuity
		5-8: Future Value of an Annuity Due
		5-9: Present Value of an Ordinary Annuity
		5-10: Finding Annuity Payments, Periods, and Interest Rates
		5-11: Perpetuities
		5-12: Uneven Cash Flows
		5-13: Future Value of an Uneven Cash Flow Stream
		5-14: Solving for I with Uneven Cash Flows
		5-15: Semiannual and Other Compounding Periods
		5-16: Comparing Interest Rates
		5-17: Fractional Time Periods
		5-18: Amortized Loans
		Tying It All Together
		Integrated Case: First National Bank
Part 3: Financial Assets
	Chapter 6: Interest Rates
		Putting Things in Perspective
		6-1: The Cost of Money
		6-2: Interest Rate Levels
		6-3: The Determinants of Market Interest Rates
		6-4: The Term Structure of Interest Rates
		6-5: What Determines the Shape of the Yield Curve?
		6-6: Using the Yield Curve to Estimate Future Interest Rates
		6-7: Macroeconomic Factors That Influence Interest Rate Levels
		6-8: Interest Rates and Business Decisions
		Tying It All Together
		IIntegrated Case: Morton Handley & Company
	Chapter 7: Bonds and Their Valuation
		Putting Things in Perspective
		7-1: Who Issues Bonds?
		7-2: Key Characteristics of Bonds
		7-3: Bond Valuation
		7-4: Bond Yields
		7-5: Changes in Bond Values over Time
		7-6: Bonds with Semiannual Coupons
		7-7: Assessing a Bond’s Riskiness
		7-8: Default Risk
		7-9: Bond Markets
		Tying It All Together
		Integrated Case: Western Money Management Inc.
	Chapter 8: Risk and Rates of Return
		Putting Things in Perspective
		8-1: The Risk-Return Trade-Off
		8-2: Stand-Alone Risk
		8-3: Risk in a Portfolio Context: The CAPM
		8-4: The Relationship between Risk and Rates of Return
		8-5: Some Concerns about Beta and the CAPM
		8-6: Some Concluding Thoughts: Implications for Corporate Managers and Investors
		Tying It All Together
		Integrated Case: Merrill Finch Inc.
	Chapter 9: Stocks and Their Valuation
		Putting Things in Perspective
		9-1: Legal Rights and Privileges of Common Stockholders
		9-2: Types of Common Stock
		9-3: Stock Price versus Intrinsic Value
		9-4: The Discounted Dividend Model
		9-5: Constant Growth Stocks
		9-6: Valuing Nonconstant Growth Stocks
		9-7: Enterprise-Based Approach to Valuation
		9-8: Preferred Stock
		Tying It All Together
		Integrated Case: Mutual of Chicago Insurance Company
Part 4: Investing in Long-Term Assets: Capital Budgeting
	Chapter 10: The Cost of Capital
		Putting Things in Perspective
		10-1: An Overview of the Weighted Average Cost of Capital (WACC)
		10-2: Basic Definitions
		10-3: Cost of Debt, rd(12T)
		10-4: Cost of Preferred Stock, rp
		10-5: Cost of Retained Earnings, rs
		10-6: Cost of New Common Stock, re
		10-7: Composite, or Weighted Average, Cost of Capital, WACC
		10-8: Factors That Affect the WACC
		10-9: Adjusting the Cost of Capital for Risk
		10-10: Some Other Problems with Cost of Capital Estimates
		Tying It All Together
		IIntegrated Case: Coleman Technologies Inc.
	Chapter 11: The Basics of Capital Budgeting
		Putting Things in Perspective
		11-1: An Overview of Capital Budgeting
		11-2: Net Present Value (NPV)
		11-3: Internal Rate of Return (IRR)
		11-4: Multiple Internal Rates of Return
		11-5: Reinvestment Rate Assumptions
		11-6: Modified Internal Rate of Return (MIRR)
		11-7: NPV Profiles
		11-8: Payback Period
		11-9: Conclusions on Capital Budgeting Methods
		11-10: Decision Criteria Used in Practice
		Tying It All Together
		IIntegrated Case: Allied Components Company
	Chapter 12: Cash Flow Estimation and Risk Analysis
		Putting Things in Perspective
		12-1: Conceptual Issues in Cash Flow Estimation
		12-2: Analysis of an Expansion Project
		12-3: Replacement Analysis
		12-4: Risk Analysis in Capital Budgeting
		12-5: Measuring Stand-Alone Risk
		12-6: Within-Firm and Beta Risk
		12-7: Unequal Project Lives
		Tying It All Together
		Integrated Case: Allied Food Products
	Chapter 13: Real Options and Other Topics in Capital Budgeting
		Putting Things in Perspective
		13-1: Introduction to Real Options
		13-2: Growth (Expansion) Options
		13-3: Abandonment/Shutdown Options
		13-4: Investment Timing Options
		13-5: Flexibility Options
		13-6: The Optimal Capital Budget
		13-7: The Post-Audit
		Tying It All Together
		IIntegrated Case: 21st Century Education Products
Part 5: Capital Structure and Dividend Policy
	Chapter 14: Capital Structure and Leverage
		Putting Things in Perspective
		14-1: Book, Market, or “Target” Weights?
		14-2: Business and Financial Risk
		14-3: Determining the Optimal Capital Structure
		14-4: Capital Structure Theory
		14-5: Checklist for Capital Structure Decisions
		14-6: Variations in Capital Structures
		Tying It All Together
		Integrated Case: Campus Deli Inc.
	Chapter 15: Distributions to Shareholders: Dividends and Share Repurchases
		Putting Things in Perspective
		15-1: Dividends versus Capital Gains: What Do Investors Prefer?
		15-2: Other Dividend Policy Issues
		15-3: Establishing the Dividend Policy in Practice
		15-4: Dividend Reinvestment Plans
		15-5: Summary of Factors Influencing Dividend Policy
		15-6: Stock Dividends and Stock Splits
		15-7: Stock Repurchases
		Tying It All Together
		Integrated Case: Southeastern Steel Company
Part 6: Working Capital Management, Financial Forecasting, and Multinational Financial Management
	Chapter 16: Working Capital Management
		Putting Things in Perspective
		16-1: Background on Working Capital
		16-2: Current Assets Investment Policies
		16-3: Current Assets Financing Policies
		16-4: The Cash Conversion Cycle
		16-5: The Cash Budget
		16-6: Cash and Marketable Securities
		16-7: Inventories
		16-8: Accounts Receivable
		16-9: Accounts Payable (Trade Credit)
		16-10: Bank Loans
		16-11: Commercial Paper
		16-12: Accruals (Accrued Liabilities)
		16-13: Use of Security in Short-Term Financing
		Tying It All Together
		Integrated Case: SKI Equipment Inc.
	Chapter 17: Financial Planning and Forecasting
		Putting Things in Perspective
		17-1: Strategic Planning
		17-2: The Sales Forecast
		17-3: The AFN Equation
		17-4: Forecasted Financial Statements
		17-5: Using Regression to Improve Forecasts
		17-6: Analyzing the Effects of Changing Ratios
		Tying It All Together
		Integrated Case: New World Chemicals Inc.
	Chapter 18: Multinational Financial Management
		Putting Things in Perspective
		18-1: Multinational, or Global, Corporations
		18-2: Multinational versus Domestic Financial Management
		18-3: The International Monetary System
		18-4: Foreign Exchange Rate Quotations
		18-5: Trading in Foreign Exchange
		18-6: Interest Rate Parity
		18-7: Purchasing Power Parity
		18-8: Inflation, Interest Rates, and Exchange Rates
		18-9: International Money and Capital Markets
		18-10: Investing Overseas
		18-11: International Capital Budgeting
		18-12: International Capital Structures
		Tying It All Together
		Integrated Case: Citrus Products Inc.
Part 7: Special Topics in Financial Management
	Chapter 19: Derivatives and Risk Management
		Putting Things in Perspective
		19-1: Reasons to Manage Risk
		19-2: Background on Derivatives
		19-3: Options
		19-4: Introduction to Option Pricing Models
		19-5: The Black-Scholes Option Pricing Model (OPM)
		19-6: Forward and Futures Contracts
		19-7: Other Types of Derivatives
		19-8: Using Derivatives to Reduce Risks
		19-9: Risk Management
		Tying It All Together
		Integrated Case: Tropical Sweets Inc.
	Chapter 20: Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles
		Putting Things in Perspective
		20-1: Preferred Stock
		20-2: Leasing
		20-3: Warrants
		20-4: Convertibles
		20-5: A Final Comparison of Warrants and Convertibles
		20-6: Reporting Earnings When Warrants or Convertibles Are Outstanding
		Tying It All Together
		Integrated Case: Fish & Chips Inc., Part I
		Integrated Case: Fish & Chips Inc., Part II
	Chapter 21: Mergers and Acquisitions
		Putting Things in Perspective
		21-1: Rationale for Mergers
		21-2: Types of Mergers
		21-3: Level of Merger Activity
		21-4: Hostile versus Friendly Takeovers
		21-5: Merger Analysis
		21-6: The Role of Investment Bankers
		21-7: Do Mergers Create Value? The Empirical Evidence
		21-8: Corporate Alliances
		21-9: Private Equity Investments
		21-10: Divestitures
		Tying It All Together
		IIntegrated Case: Smitty’s Home Repair Company
Appendix A: Solutions to Self-Test Questions and Problems
Appendix B: Answers to Selected End-of-Chapter Problems
Appendix C: Selected Equations and Tables
Index