Principles of Managerial Finance [Global Edition]

Cover
Half Title
Title Page
Copyright
Dedication
Brief Contents
Contents
About the Authors
Preface
Acknowledgments
Part 1: Introduction to Managerial Finance
	Chapter 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?
				Focus on Ethics: Do Corporate Executives Have a Social Responsibility?
			The Role of Business Ethics
				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
				Focus on People/Planet/Profits: The Business Roundtable Revisits the Goal of a Corporation
			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
		Opener-In-Review
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 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
				Focus on Practice: Berkshire Hathaway: Can Buffett Be Replaced?
			The Efficient Markets Hypothesis
				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
			Pandemic Effects on Financial Markets
				Focus on People/Planet/Profits: Financial Institutions Pressure Companies on ESG Scores
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
		Integrative Case 1 South Trading Ltd.
Part 2: Financial Tools
	Chapter 3: Financial Statements and Ratio Analysis
		3.1 Mandatory Financial Reports of Public Companies
			The Letter to Stockholders
			The Four Key Financial Statements
				Focus on Practice: More Countries Adopt International Financial Reporting Standards
				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 Ratio
			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 Target's Financial Condition
			DuPont System of Analysis
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 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
				Focus on Ethics: Is Excess Cash Always a Good Thing?
				Focus on Practice: Free Cash Flow at Abercrombie & Fitch
			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
			Review Questions
		4.4 Profit Planning: Pro Forma Statements
			Current 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
			Focus on People/Planet/Profits: Financial Planning and Financial Sustainability
			Review Questions
		4.7 Evaluation of Pro Forma Statements
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 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
				Focus on People/Planet/Profits: The Time Value of Money Heats Up Climate Change Debate
			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
				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
				Focus on Practice: New Century Brings Trouble for Subprime Mortgages
			Finding an Unknown Number of Periods
			Review Questions
			Excel Review Questions
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
		Integrative Case 2 Epix Ltd.
Part 3: Valuation of Securities
	Chapter 6: Interest Rates and Bond Valuation
		6.1 Interest Rates and Required Returns
			Interest Rate Fundamentals
			Term Structure of Interest Rates
				Focus on Practice: I-Bonds Adjust for Inflation
			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
				Focus on Ethics: "Can Bond Ratings Be Trusted?"
				Focus on People/Planet/Profits: How Do I Love Thee? Let Me Count the Yield
			Review Questions
		6.3 Valuation Fundamentals
			Key Inputs
			Basic Valuation Model
			Review Questions
		6.4 Bond Valuation
			Bond Fundamentals
			Bond Values for Annual Coupons
			Bond Values for Semiannual Coupons
			Changes in Bond Prices
			Yield to Maturity (YTM)
			Review Questions
			Excel Review Questions
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 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
				Focus on People/Planet/Profits: Shrinking and Growing at the Same Time
			Preferred Stock
			Review Questions
		7.3 Common Stock Valuation
			Market Efficiency and Stock Valuation
			Common Stock Dividend Valuation Model
				Focus on Practice: Understanding Human Behavior Helps Us Understand Investor Behavior
			Free Cash Flow Stock Valuation Model
			Other Approaches to Common Stock Valuation
				Focus on Ethics: Index Funds and Corporate Governance
			Review Questions
		7.4 Decision Making and Common Stock Value
			Changes in Expected Dividends
			Changes in Risk
			Combined Effect
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
		Integrative Case 3 Meyer Bargains AG
Part 4: Risk and the Required Rate of Return
	Chapter 8: Risk and Return
		8.1 Risk and Return Fundamentals
			Focus on Ethics: If It Seems Too Good to Be True, It Probably Is
			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 and Efficient Portfolios
			Summary of the Effect of Correlation on Risk and Return
				Focus on Global Finance: An International Flavor to Diversification
			Review Questions
		8.4 Risk and Return: The Capital Asset Pricing Model (CAPM)
			Types of Risk
			The Model: CAPM
				Focus on People/Planet/Profits: Happy Employees Signal High Stock Returns
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 9: The Cost of Capital
		9.1 Overview of the Cost of Capital
			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
		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)
				Focus on Practice: Uncertain Times Make for an Un certain Weighted Average Cost of Capital
			Capital Structure Weights
			WACC as a Hurdle Rate
				Focus on People/Planet/Profits: Diverse Boards Borrow Less
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
		Integrative Case 4 Finch Interiors PLC
Part 5: Long-Term Investment Decisions
	Chapter 10: Capital Budgeting Techniques
		10.1 Overview of Capital Budgeting
			The Capital Budgeting Process
			Terminology
			Capital Budgeting Techniques
			Review Question
		10.2 Payback Period
			Decision Criteria
			Pros and Cons of Payback Analysis
				Focus on People/Planet/Profits: Payback from the Sun
			Discounted Payback
			Review Questions
		10.3 Net Present Value (NPV)
			Decision Criteria
			NPV and the Profitability Index
			NPV and Economic Value Added
			Review Questions
		10.4 Internal Rate of Return (IRR)
			Decision Criteria
			Review Questions
		10.5 Comparing NPV and IRR Techniques
			Net Present Value Profiles
			Conflicting Rankings
			Other Problems with IRR
			Modified IRR
			Is NPV or IRR Better?
				Focus on Ethics: Baby You Can Drive My Car—Just Not a VW Diesel
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 11: Capital Budgeting Cash Flows
		11.1 Project Cash Flows
			Incremental Cash Flows
			Sunk Costs and Opportunity Costs
				Focus on Ethics: Fumbling Sunk Costs
			Financing Costs
			Review Questions
		11.2 Finding the Initial Cash Flow
			Installed Cost of the New Asset
			After-Tax Proceeds from the Sale of the Old Asset
			Change in Net Working Capital
			Summary: Calculating the Initial Cash Flow
			Review Questions
		11.3 Finding the Periodic Cash Flows
			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 Putting It All Together
			Review Question
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 12: Risk and Refinements in Capital Budgeting
		12.1 Assessing Risk in Capital Budgeting
			Break-Even Analysis
			Operating Leverage
				Focus on Practice: Operating Leverage and Steel
			Sensitivity Analysis
			Scenario Analysis
			Simulation
				Focus on Practice: The Monte Carlo Method: The Forecast Is for Less Uncertainty
			Review Questions
			Excel Review Question
		12.2 International Risk Considerations
			Review Question
		12.3 Risk-Adjusted Discount Rates
			Determining Risk-Adjusted Discount Rates (RADRS)
				Focus on Ethics: Remain Calm—All Is Well
			Estimating RADRS
			Portfolio Effects
			Review Questions
		12.4 Capital Budgeting Refinements
			Comparing Projects with Unequal Lives
			Recognizing Real Options
				Focus on People/Planet/Profits: Operating Leverage, Real Options, and Green Energy Investments
			Capital Rationing
			Review Questions
			Excel Review Question
		Summary
		Opener-In-Review
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
		Integrative Case 5 Eco Media Limited
Part 6: Long-Term Financial Decisions
	Chapter 13: Capital Structure
		13.1 Financial Leverage and Its Effects
			Focus on Ethics: Repo 105 Man
			Review Questions
		13.2 Capital Structure Irrelevance in Perfect Markets
			Proposition One: Value Is Independent of Financing Mix
			Proposition Two: WACC Is Independent of Financing Mix
			Review Questions
		13.3 M&M and Taxes
			Corporate Taxes
				Focus on People/Planet/Profits: Green Apple
			Personal Taxes
			Review Questions
		13.4 Trading Off Debt's Benefits and Costs
			The Declining Marginal Tax Benefit of Debt
			The Increasing Marginal Cost of Debt: Bankruptcy
			A Capital Structure Tradeoff Model
			Asset Characteristics and Bankruptcy Costs
			Review Questions
		13.5 Other Factors That Influence Capital Structure Choices
			Agency Costs
			Asymmetric Information
				Focus on Practice: Evidence from a CFO Survey
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 14: Payout Policy
		14.1 The Basics of Payout Policy
			Elements of Payout Policy
			Trends in Earnings and Dividends
			Trends in Dividends and Share Repurchases
			Review Questions
				Focus on Ethics: Buyback Mountain
		14.2 The Mechanics of Payout Policy
			Cash Dividend Payment Procedures
			Share Repurchase Procedures
			Tax Treatment of Dividends and Repurchases
				Focus on Practice: Capital Gains and Dividend Tax Treatment Extended to 2012 and Beyond for Some
			Dividend Reinvestment Plans
			Stock Price Reactions to Corporate Payouts
			Review Questions
		14.3 Value Relevance of Payout Policy
			The Dividend Irrelevance Theory
			The Impact of Dividends in Imperfect Markets
			Why Payout Policy Matters
			Residual Theory of Dividends
			Review Questions
		14.4 Factors Affecting Payout Policy
			Legal Constraints
			Contractual Constraints
			Growth Prospects
			Owner Considerations
			Market Considerations
			Review Question
		14.5 Types of Dividend Policies
			Constant-Payout-Ratio Dividend Policy
			Regular Dividend Policy
			Low-Regular-and-Extra Dividend Policy
			Review Question
		14.6 Other Forms of Dividends
			Stock Dividends
			Stock Splits
			Review Questions
		14.7 Criticisms of Payout Policy
			Review Question
		Summary
		Opener-In-Review
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
		Integrative Case 6 O'Grady Apparel Company
Part 7: Short-Term Financial Decisions
	Chapter 15: Working Capital and Current Assets Management
		15.1 Net Working Capital Fundamentals
			Working Capital Management
			Net Working Capital
			Tradeoff Between Profitability and Risk
			Review Questions
		15.2 Cash Conversion Cycle
			Calculating the Cash Conversion Cycle
			Funding Requirements of the Cash Conversion Cycle
			Strategies for Managing the Cash Conversion Cycle
			Review Questions
		15.3 Inventory Management
			Differing Viewpoints About Inventory Level
			Common Techniques for Managing Inventory
				Focus on Practice: In Bed with RFID
			Review Questions
		15.4 Accounts Receivable Management
			Credit Selection and Standards
				Focus on Ethics: If You Can Bilk It, They Will Come
			Credit Terms
			Credit Monitoring
			Review Questions
		15.5 Management of Receipts and Disbursements
			Float
			Speeding Up Collections
			Slowing Down Payments
			Cash Concentration
			Zero-Balance Accounts
			Investing in Marketable Securities
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 16: Current Liabilities Management
		16.1 Spontaneous Liabilities
			Accounts Payable Management
			Accruals
			Review Questions
		16.2 Unsecured Sources of Short-Term Loans
			Focus on Ethics: Bank Loans and Shareholder Wealth
			Bank Loans
				Focus on People/Planet/Profits: Banks Transmit Values Through Loans
			Commercial Paper
				Focus on Practice: The Ebb and Flow of Commercial Paper
			International Loans
			Review Questions
		16.3 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
		Opener-In-Review
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
		Integrative Case 7 Sums Metal Casting
Part 8: Special Topics in Managerial Finance
	Chapter 17: Hybrid and Derivative Securities
		17.1 Overview of Hybrids and Derivatives
			Review Question
		17.2 Leasing
			Types of Leases
				Focus on Practice: I'd Like to Return This (Entire Store), Please
			Leasing Arrangements
			Lease-Versus-Purchase Decision
			Advantages of Leasing
			Review Questions
		17.3 Convertible Securities
			Types of Convertible Securities
			General Features of Convertibles
				Focus on People/Planet/Profits: Green CoCo Bonds
			Financing with Convertibles
			Determining the Value of a Convertible Bond
			Review Questions
		17.4 Stock Purchase Warrants
			Key Characteristics
			Implied Price of an Attached Warrant
			Values of Warrants
			Review Questions
		17.5 Options
			Calls and Puts
			Options Markets
			Options Trading
			Role of Call and Put Options in Fund Raising
				Focus on Ethics: Banking on Options
			Hedging Foreign-Currency Exposures with Options
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 18: Mergers, LBOs, Divestitures, and Business Failure
		18.1 Merger Fundamentals
			Terminology
			Motives for Merging
				Focus on Ethics: Is There Any Good in Greed?
			Types of Mergers
			Review Questions
		18.2 LBOs and Divestitures
			Leveraged Buyouts (LBOS)
			Divestitures
			Review Questions
		18.3 Analyzing and Negotiating Mergers
			Valuing the Target Company
			Stock Swap Transactions
			Merger Negotiation Process
			Holding Companies
			International Mergers
			Review Questions
				Focus on Global Finance: International Mergers
		18.4 Business Failure Fundamentals
			Types of Business Failure
			Major Causes of Business Failure
			Voluntary Settlements
			Review Questions
		18.5 Reorganization and Liquidation in Bankruptcy
			Bankruptcy Legislation
			Reorganization in Bankruptcy (Chapter 11)
			Liquidation in Bankruptcy (Chapter 7)
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problems
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
	Chapter 19: International Managerial Finance
		19.1 The Multinational Company and Its Environment
			Key Trading Blocs
			GATT and the WTO
			Legal Forms of Business Organization
			Taxes
			Financial Markets
			Review Questions
		19.2 Financial Statements
			Subsidiary Characterization and Functional Currency
			Translation of Individual Accounts
			Review Question
		19.3 Risk
			Exchange Rate Risks
			Political Risks
				Focus on Ethics: Is Fair-Trade Coffee Fair?
			Review Questions
		19.4 Long-Term Investment and Financing Decisions
			Foreign Direct Investment
			Investment Cash Flows and Decisions
			Capital Structure
			Long-Term Debt
				Focus on Global Finance: Take an Overseas Assignment to Take a Step Up the Corporate Ladder
			Equity Capital
			Review Questions
		19.5 Short-Term Financial Decisions
			Cash Management
			Credit and Inventory Management
			Review Questions
		Summary
		Opener-In-Review
		Self-Test Problem
		Warm-Up Exercises
		Problems
		Spreadsheet Exercise
		Integrative Case 8 Organic Solutions
Appendix: Solutions to Self-Test Problems
Glossary
Index
	A
	B
	C
	D
	E
	F
	G
	H
	I
	J
	K
	L
	M
	N
	O
	P
	Q
	R
	S
	T
	U
	V
	W
	Y
	Z