CONTENTS
PREFACE XIII
PART I
INTRODUCTION TO FlNANCIAL MANAGEMENT
CHAPTER 1
THE ROLE OF FlNANCIAL MANAGEMENT
Introduction
What Is Financial Management?
The Goal of the Firm
Organization of the Financiai Management
Function
Organization of the Book
Summary
Questiona
Selected References
CHAPTER 2
THE BUSINESS, TAX, AND FlNANCIAL ENVIRUNMENTS
The Business Environment
The Tax Environment
The Financial Environment
Summary
Questions
Self-Correction Problems
Problems
Sahitions to Self-Correction Problems
Selected References
PART II
VALUATION
CHAPTER 3
TBE TlME VALUE OF MONEY
The Interest Rate
Simple Interest
Compound Interest
Compounding More Than Once a Year
Amortizing a Loan
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 4
FHE VALUATION OF LONG-TERM SECURMES
DIStinctions Among Valuation Cocepts
Bond Valuation
Preferred Stock Valuation
Common Stock Valuation
Rates of Return (or Yields)
Summary Table of Key Present Value Formulas
for Valuing Long-Term Securtties
Summary
Questions
Self-Correction Pmblems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 5
RlSK AND RETURN
Defining Risk and Retum
Using Probability Distributions
to Measure Risk
Attitudes Toward Risk
Risk and Retum in a Portfolio Context
Diversification
The Capital-Asset Pricing Model
Summary
Appendix A: Measuring Portfolio Risk
Appendix B: Arbitrage Pricing Theory
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
PART III
TOOLS OF FINANCIAL ANALYSIS AND PLANNING
CHAPTER 6
FlNANClAL STATENT ANALYSIS
Finandal Statements
A Possible Framework for Analysis
Balance Sheet Ratios
Income Statement and Income
Statement/Balance Sheet Ratios
Trend Analysis
Common-Size and Index Analysis
Summary
Summary of Key Ratios
Appendix: Deferred Taxes and Financial
Analysis
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 7
FUNDS ANALYSIS, CASH-FLOW ANALYSIS
AND FlNANCIAL PLANNING
Flow of Funds (Sources and Uses)
Statement
Accounting Statement of Cash Flows
Cash-Flow Forecashng
Range of Cash-Flow Estimates
Forccasting Finandal Statements
Summary
Appendix: Sustainable Growth
Modeling
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
PART IV
WORKING CAPITAL MANAGEMENT
CHAPTER 8
OVERVIEW OF WORKING CAPITAL MANAGEMENT
Introductior
Working Capital Issues
Finandng Current Assets: Short-Term
and Long-Term Mix
Combining Liability Structure
and Current Asset Decisions
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 9
CASH AND MARKETABLE SECURITIES MANAGEMENT
Motives for Holding Cash
Speeding Up Cash Receipts
S-l-o-w-i-n-g D-o-w-n Cash Payouts
Electronic Commerce
Outsourcing
Cash Balances to Maintain
Investment in Marketable Securities
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 10
ACCOUNTS RECEIVABLE AND INVENTORY
MANAGEMENT
Credit and Collection Policies
Analyzing the Credit Applicant
Inventory Management and Control
Summary
Questions
Self-Correction Problems :
Problems
Solutions to Self-Correction Problems :
Selected References
CHAPTER 11
SHORT-TERM FlNANCING
Spontaneous Financing
Negotiated Financing
Factoring Accounts Receivable
Composition of Short-Term Financing
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
PART V
INVESTMENT IN CAPITAL ASSETS
CHAPTER 12
CAPITAL BUDGETING AND ESTIMATING CASH FLOWS
The Capital Budgeting Process:
An Overview
Generating Investment Project Proposals
Estimating Project "After-Tax Incremental
Operating Cash Flows"
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 13
CAPnAL BUDGETING TECHNIQUES
Project Evaluation and Selection:
Altemative Methods
Potential Difficulties
Project Monitoring: Progress Reviews
and Post-Completion Audits
Summary
Appendix A: Multiple Intemal Rates
of Retum
Appendix B: Replacement Chain
Analysis
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 14
RlSK AND MANAGERIAL OPTIONS
IN CAPITAL BUDGETING
The Problem of Project Risk
Total Project Risk
Contribution to Total Firm Risk:
Firm-Portfolio Approach
Managerial Options
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
PARTVI
THE COST OF CAPITAL, CAPITAL STRUCTURE
AND DIVIDEND POLICY
CHAPTER 15
REQUIRED RETURNS AND THE COST OF CAPITAL
Creation of Value
Overall Cost of Capital of the Firm
The CAPM: Project-Specific and Group-Specific
Required Rates of Return
Evaluation of Projects on the Basis
of Their Total Risk
Summary
Appendix A: Adjushng the Beta
for Financial Leverage
Appendix B: Adjusted Present Value
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 16
OPERATING AND FlNANCIAL LEVERAGE
Operating Leverage
Financial Leverage
Total Leverage
Cash-Flow Ability to Service Debt
Other Methods of Analysis
Combination of Methods
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 17
CAPITAL STRUCTURE DETERMINATION
A Conceptual Look
The Total-Value Principle
Presence of Market Imperfections
and Incentive Issues
The Effect of Taxes
Taxes and Market Imperfections Combined
Financial Signaling
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 18
DlVIDEND POLICY
Passive versus Active Dividend Policy
Factors Influencing Dividend Policy
Dividend Stability
Stock Dividends and Stock Splits
Stock Repurchase
Administrative Considerations
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
PART VII
INTERMEDIATE AND LONG-TERM FINANCING
CHAPTER 19
THE CAPITAL MARKET
Deja Vu All Over Again
Public Issue
Privileged Subscription
Regulation of Security Offerings
Private Placement
Initial Financing
Signaling Effects
The Secondary Market
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 20
LONG-TERM DEBT, PREFERRED STOCK
AND COMMON STOCK
Bonds and Their Features
Types of Long-Term Debt Instruments
Retirement of Bonds
Preferred Stock and Its Features
Common Stock and Its Features
Rights to Common Shareholders
Dual-Class Common Stock
Summary
Appendix: Refunding a Bond Issue
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 21
TERM LOANS AND LEASES
Term Loans
Provisions of Loan Agreements
Equipment Financing
Lease Financing
Evaluating Lease Financing in Relation
to Debt Financing
Summary
Appendix: Accounting Treatment
of Leases
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
PART VIII
SPECIAL AREAS OF FINANCIAL MANAGEMENT
CHAPTER 22
CONVERTIBLES, EXCHANGEABLES, AND WARRANTS 586
Convertible Security Features
Use of Convertibles
Value of Convertible Securities
Exchangeable Bonds
Warrants
Summary
Appendix: Option Pricing
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 23
MERGERS AND OTHER FORMS
OF CORPORATE RESTRUCTURING
Sources of Value
Strategic Acquisitions Involving
Common Stock
Acquisitions and Capital Budgeting
Closing the Deal
Takeovers Tender Offers, and Defenses
Strategic Alliances
Divestiture
Ownership Restructurirtg
Leveraged Buyouts
Summary
Appendix: Remedies
for a Failing Company
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
CHAPTER 24
INTERNATIONAL FlNANCIAL MANAGEMENT
Some Background
Types of Exchange-Rate Risk Exposure
Management of Exchange-Rate Risk
Exposure
Structuring Intemational Trade
Transactions
Summary
Questions
Self-Correction Problems
Problems
Solutions to Self-Correction Problems
Selected References
APPENOIX
Table 1: Future value interest factor
Table 11: Present value interest factor
Table III: Future value interest factor of an
(ordinary) annuity
Table IV: Present value interest factor of an
(ordinary) annuity
Table V: Area of normal distribution that is Z
standard deviations to the left or right
of the mean
GLOSSARY
INDEX
COMMONLY USEO SYMBOLS
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