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