Principles of Managerial Finance, Brief (What's New in Finance)

Cover
Title Page
Copyright Page
Dedication
Brief Contents
Contents
About the Authors
Preface
Acknowledgments
Global Edition Acknowledgments
About the Authors
Preface
Acknowledgments
Part 1: Introduction to Managerial Finance
	1. The Role of Managerial Finance
		1.1. Finance and the Firm
			What Is Finance?
			What Is a Firm?
			What Is the Goal of the Firm?
			The Role of Business Ethics
		In Practice: Focus on Practice: Must Search Engines Screen Out Fake News?
		Review Questions
		1.2. Managing the Firm
			The Managerial Finance Function
		Review Questions
		1.3. Organizational Forms, Taxation, and the Principal–Agent Relationship
			Legal Forms of Business Organization
			Agency Problems and Agency Costs
			Corporate Governance
		Review Questions
		1.4. Developing Skills for Your Career
			Critical Thinking
			Communication and Collaboration
			Financial Computing Skills
		Summary
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	2. The Financial Market Environment
		2.1. Financial Institutions
			Commercial Banks, Investment Banks, and the Shadow Banking System
		Review Questions
		2.2. Financial Markets
			The Relationship Between Institutions and Markets
			The Money Market
			The Capital Market
			The Role of Capital Markets
		In Practice: Focus on Ethics: Should Insider Trading Be Legal?
		Review Questions
		2.3. Regulation of Financial Markets and Institutions
			Regulations Governing Financial Institutions
			Regulations Governing Financial Markets
		Review Questions
		2.4. The Securities Issuing Process
			Issuing Common Stock
		Review Questions
		2.5. Financial Markets in Crisis
			Financial Institutions and Real Estate Finance
			Spillover Effects and Recovery from the Great Recession
		Review Questions
		Summary
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
Part 2: Financial Tools
	3. Financial Statements and Ratio Analysis
		3.1. The Stockholders’ Report
			The Letter to Stockholders
			The Four Key Financial Statements
		In Practice: Focus on Ethics: Earnings Shenanigans
			Notes to the Financial Statements
			Consolidating International Financial Statements
		Review Questions
		3.2. Using Financial Ratios
			Interested Parties
			Types of Ratio Comparisons
			Cautions About Using Ratio Analysis
		Review Questions
		3.3. Liquidity Ratios
			Current Ratio
			Quick (Acid-Test) Ratio
		Review Questions
		3.4. Activity Ratios
			Inventory Turnover
			Average Collection Period
			Average Payment Period
			Total Asset Turnover
		Review Question
		3.5. Debt Ratios
			Debt Ratio
			Debt-to-Equity Ratio
			Times Interest Earned Ratio
			Fixed-Payment Coverage Ratio
		Review Questions
		3.6. Profitability Ratios
			Common-Size Income Statements
			Gross Profit Margin
			Operating Profit Margin
			Net Profit Margin
			Earnings Per Share (EPS)
			Return on Total Assets (ROA)
			Return on Equity (ROE)
		Review Questions
		3.7. Market Ratios
			Price/Earnings (P/E) Ratio
			Market/Book (M/B) Ratio
		Review Question
		3.8. A Complete Ratio Analysis
			Summary of Whole Foods’ Financial  Condition
			DuPont System of Analysis
		Review Questions
		Summary
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	4. Long- and Short- Term Financial Planning
		4.1. The Financial Planning Process
			Long-Term (Strategic) Financial Plans
			Short-Term (Operating) Financial Plans
		Review Questions
		4.2. Measuring the Firm’s Cash Flow
			Depreciation
			Depreciation Methods
			Developing the Statement of Cash Flows
			Free Cash Flow
		In Practice: Focus on Ethics: Is Excess Cash Always a Good Thing?
		Review Questions
		4.3. Cash Planning: Cash Budgets
			The Sales Forecast
			Preparing the Cash Budget
			Evaluating the Cash Budget
			Coping with Uncertainty in the Cash Budget
			Cash Flow within the Month
		Review Questions
		4.4. Profit Planning: Pro Forma Statements
			Preceding Year’s Financial Statements
			Sales Forecast
		Review Question
		4.5. Preparing the Pro Forma Income Statement
			Considering Types of Costs and Expenses
		Review Questions
		4.6. Preparing the Pro Forma Balance Sheet
		Review Questions
		4.7. Evaluation of Pro Forma Statements
		Review Questions
		Summary
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	5. Time Value of Money
		5.1. The Role of Time Value in Finance
			Future Value Versus Present Value
			Computational Tools
			Basic Patterns of Cash Flow
		Review Questions
		5.2. Single Amounts
			Future Value of a Single Amount
			Present Value of a Single Amount
		Review Questions
		Excel Review Questions
		5.3. Annuities
			Types of Annuities
			Finding the Future Value of an Ordinary Annuity
			Finding the Present Value of an Ordinary Annuity
			Finding the Future Value of an Annuity Due
			Finding the Present Value of an Annuity Due
			Finding the Present Value of a Perpetuity
		Review Questions
		Excel Review Questions
		5.4. Mixed Streams
			Future Value of a Mixed Stream
			Present Value of a Mixed Stream
		Review Question
		Excel Review Question
		5.5. Compounding Interest More Frequently than Annually
			Semiannual Compounding
			Quarterly Compounding
			A General Equation for Compounding
			Using Computational Tools for Compounding
			Continuous Compounding
			Nominal and Effective Annual Rates of Interest
		Review Questions
		In Practice: Focus on Ethics: Was the Deal for Manhattan a Swindle?
		Excel Review Questions
		5.6. Special Applications of Time Value
			Determining Deposits Needed to Accumulate a Future Sum
			Loan Amortization
			Finding Interest or Growth Rates
			Finding an Unknown Number of Periods
		Review Questions
		Excel Review Questions
		Summary
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
Part 3: Valuation of Securities
	6. Interest Rates and Bond Valuation
		6.1. Interest Rates and Required Returns
			Interest Rate Fundamentals
			Term Structure of Interest Rates
			Risk Premiums: Issuer and Issue Characteristics
		Review Questions
		6.2. Government and Corporate Bonds
			Legal Aspects of Corporate Bonds
			Cost of Bonds to the Issuer
			General Features of a Bond Issue
			Bond Yields
			Bond Prices
			Bond Ratings
			Common Types of Bonds
			International Bond Issues
		In Practice: Focus on Ethics: “Can Bond Ratings Be Trusted?”
		Review Questions
		6.3. Valuation Fundamentals
			Key Inputs
			Basic Valuation Model
		Review Questions
		6.4. Bond Valuation
			Bond Fundamentals
			Bond Valuation
			Semiannual Interest Rates and Bond Values
			Changes in Bond Values
			Yield to Maturity (YTM)
		Review Questions
		Excel Review Questions
		Summary
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	7. Stock Valuation
		7.1. Differences Between Debt and Equity
			Voice in Management
			Claims on Income and Assets
			Maturity
			Tax Treatment
		Review Question
		7.2. Common and Preferred Stock
			Common Stock
			Preferred Stock
		Review Questions
		7.3. Common Stock Valuation
			Market Efficiency and Stock Valuation
			Common Stock Dividend Valuation Model
		In Practice: Focus on Practice: Understanding Human Behavior Helps Us Understand Investor Behavior
			Free Cash Flow Stock Valuation Model
			Other Approaches to Common Stock Valuation
		Review Questions
		7.4. Decision Making and Common Stock Value
			Changes in Expected Dividends
			Changes in Risk
			Combined Effect
		Review Questions
		Summary
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
Part 4: Risk and the Required Rate of Return
	8. Risk and Return
		8.1. Risk and Return Fundamentals
			What Is Risk?
			What Is Return?
			Risk Preferences
		Review Questions
		8.2. Risk of a Single Asset
			Risk Assessment
			Risk Measurement
		Review Questions
		8.3. Risk of a Portfolio
			Portfolio Return and Standard Deviation
			Correlation
			Diversification
			Correlation, Diversification, Risk, and Return
			International Diversification
		In Practice: Global Focus: An International Flavor to Risk Reduction
		Review Questions
		8.4. Risk and Return: The Capital Asset Pricing Model (CAPM)
			Types of Risk
			The Model: CAPM
		Review Questions
		Summary
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	9. The Cost of Capital
		9.1. Overview of the Cost of Capital
		In Practice: Focus on Ethics: The Cost of Capital Also Rises
			The Basic Concept
			Sources of Long-Term Capital
		Review Questions
		9.2. Cost of Long-Term Debt
			Net Proceeds
			Before-Tax Cost of Debt
			After-Tax Cost of Debt
		Review Questions
		Excel Review Question
		9.3. Cost of Preferred Stock
			Preferred Stock Dividends
			Calculating the Cost of Preferred Stock
		Review Question
		9.4. Cost of Common Stock
			Finding the Cost of Common Stock Equity
			Cost of Retained Earnings
		Review Questions
		9.5. Weighted Average Cost of Capital
			Calculating the Weighted Average Cost of Capital (WACC)
			Capital Structure Weights
		Review Questions
		Summary
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
Part 5: Long-Term Investment Decisions
	10. Capital Budgeting Techniques
		10.1. Overview of Capital Budgeting
			Motives for Capital Expenditure
			Steps in the Process
			Basic Terminology
			Capital Budgeting Techniques
		Review Question
		10.2. Payback Period
			Decision Criteria
			Pros and Cons of Payback Analysis
		Review Questions
		10.3. Net Present Value (NPV)
			Decision Criteria
			NPV and the Profitability Index
			NPV and Economic Value Added
		Review Questions
		Excel Review Question
		10.4. Internal Rate of Return (IRR)
			Decision Criteria
			Calculating the IRR
		Review Questions
		Excel Review Question
		10.5. Comparing NPV and IRR Techniques
			Net Present Value Profiles
			Conflicting Rankings
			Which Approach Is Better?
		In Practice: Focus on Ethics: Baby You Can Drive My Car—Just Not a VW Diesel
		Review Questions
		Summary
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	11. Capital Budgeting Cash Flows and Risk Refinements
		11.1. Project Cash Flows
			Major Cash Flow Types
			Replacement Versus Expansion Decisions
			Sunk Costs and Opportunity Costs
		In Practice: Focus on Ethics: Fumbling Sunk Costs
		Review Questions
		11.2. Finding the Initial Investment
			Installed Cost of the New Asset
			After-Tax Proceeds from the Sale of the Old Asset
			Change in Net Working Capital
			Calculating the Initial Investment
		Review Questions
		11.3. Finding the Operating Cash Flows
			Interpreting the Term Cash Flows
			Interpreting the Term After-Tax
			Interpreting the Term Incremental
		Review Questions
		11.4. Finding the Terminal Cash Flow
			After-Tax Proceeds from the Sale of New and Old Assets
			Change in Net Working Capital
		Review Question
		11.5. Risk in Capital Budgeting  ( Behavioral Approaches)
			Breakeven Analysis
			Scenario Analysis
			Simulation
		Review Questions
		Excel Review Question
		11.6. Risk-Adjusted Discount Rates
			Determining Risk-Adjusted Discount Rates (RADRs)
			Applying RADRs
			Portfolio Effects
			RADRs in Practice
		Review Questions
		11.7. Capital Budgeting Refinements
			Comparing Projects with Unequal Lives
			Recognizing Real Options
			Capital Rationing
		Review Questions
		Excel Review Question
		Summary
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
Part 6: Long-Term Financial Decisions
	12. Leverage and Capital Structure
		12.1. Leverage
			Breakeven Analysis
			Operating Leverage
		In Practice: Focus on Practice: Qualcomm’s Leverage
			Financial Leverage
			Total Leverage
		Review Questions
		12.2. The Firm’s Capital Structure
			Types of Capital
			External Assessment of Capital Structure
			Capital Structure of Non–U.S. Firms
			Capital Structure Theory
			Optimal Capital Structure
		Review Questions
		12.3. EBIT–EPS Approach to Capital Structure
			Presenting a Financing Plan Graphically
			Comparing Alternative Capital Structures
			Considering Risk in EBIT–EPS Analysis
			Basic Shortcoming of EBIT–EPS Analysis
		Review Question
		12.4. Choosing the Optimal Capital Structure
			Linkage
			Estimating Value
			Maximizing Value Versus Maximizing EPS
			Some Other Important Considerations
		Review Questions
		Summary
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	13. Payout Policy
		13.1. The Basics of Payout Policy
			Elements of Payout Policy
			Trends in Earnings and Dividends
			Trends in Dividends and Share Repurchases
		Review Questions
		In Practice: Focus on Ethics: Buyback Mountain
		13.2. The Mechanics of Payout Policy
			Cash Dividend Payment Procedures
			Share Repurchase Procedures
			Tax Treatment of Dividends and Repurchases
			Dividend Reinvestment Plans
			Stock Price Reactions to Corporate Payouts
		Review Questions
		13.3. Relevance of Payout Policy
			Residual Theory of Dividends
			The Dividend Irrelevance Theory
			Arguments for Dividend Relevance
		Review Questions
		13.4. Factors Affecting Dividend Policy
			Legal Constraints
			Contractual Constraints
			Growth Prospects
			Owner Considerations
			Market Considerations
		Review Question
		13.5. Types of Dividend Policies
			Constant-Payout-Ratio Dividend Policy
			Regular Dividend Policy
			Low-Regular-and-Extra Dividend Policy
		Review Question
		13.6. Other Forms of Dividends
			Stock Dividends
			Stock Splits
		Review Questions
		Summary
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
Part 7: Short-Term Financial Decisions
	14. Working Capital and Current Assets Management
		14.1. Net Working Capital Fundamentals
			Working Capital Management
			Net Working Capital
			Tradeoff between Profitability and Risk
		Review Questions
		14.2. Cash Conversion Cycle
			Calculating the Cash Conversion Cycle
			Funding Requirements of the Cash Conversion Cycle
			Strategies for Managing the Cash Conversion Cycle
		Review Questions
		14.3. Inventory Management
			Differing Viewpoints about Inventory Level
			Common Techniques for Managing Inventory
			International Inventory Management
		Review Questions
		14.4. Accounts Receivable Management
			Credit Selection and Standards
		In Practice: Focus on Ethics: If You Can Bilk It, They Will Come
			Credit Terms
			Credit Monitoring
		Review Questions
		14.5. Management of Receipts and Disbursements
			Float
			Speeding Up Collections
			Slowing Down Payments
			Cash Concentration
			Zero-Balance Accounts
			Investing in Marketable Securities
		Review Questions
		Summary
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	15. Current Liabilities Management
		15.1. Spontaneous Liabilities
			Accounts Payable Management
			Accruals
		Review Questions
		15.2. Unsecured Sources of Short-Term Loans
			Bank Loans
			Commercial Paper
		In Practice: Focus on Practice: The Ebb and Flow of Commercial Paper
			International Loans
		Review Questions
		15.3. Secured Sources of Short-Term Loans
			Characteristics of Secured Short-Term Loans
			Use of Accounts Receivable as Collateral
			Use of Inventory as Collateral
		Review Questions
		Summary
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
Appendix
Glossary
Index
Back Cover