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CONTENTs Preface 00 Part 1: The Scope and Environment of Financial Management chapter 1 An Introduction to Financial Management??00 What Is Finance???00 Goal of the Firm??00 Legal Forms of Business Organization??00 Ten Principles that Form the Basics of Financial Management??00 Principle 1: The Risk-Return Trade-off?We Won?t Take on Additional Risk Unless We Expect to Be Compensated with Additional Return??00 Principle 2: The Time Value of Money?A Dollar Received Today Is Worth More Than a Dollar Received in the Future??00 Principle 3: Cash?Not Profits?Is King??00 Principle 4: Incremental Cash Flows?It?s Only What Changes That Counts??00 Principle 5:The Curse of Competitive Markets?Why It?s Hard to Find Exceptionally Profitable Projects??00 Principle 6: Efficient Capital Markets?The Markets Are Quick and the Prices Are Right??00 Principle 7: The Agency Problems?Manager?s Won?t Work for Owners Unless It?s in Their Best Interest??00 Principle 8: Taxes Bias Business Decisions??00 Principle 9: All Risk Is Not Equal?Some Risk Can Be Diversified Away, and Some Cannot??00 Principle 10: Ethical Behavior Is Doing the Right Thing, and Ethical Dilemmas AreEverywhere in Finance??00 Overview of the Text??00 Finance and the Multinational Firm: The New Role?? How Financial Managers Use This Material Summary?00 chapter 2 Understanding Financial Statements, Taxes, and Cash Flows The Income Statement: Measuring a Company?s Profits The Balance Sheet: Measuring a Firm?s Book Value Computing a Company?s Taxes Measuring Free Cash Flows Financial Statements and International Finance How Financial Managers Use the Information from Financial Statements Summary chapter 3 Evaluating a Firm?s Financial Performance Financial Ratio Analysis The DuPont Analysis: An Integrative Approach to Ratio Analysis Summary chapter 4 Financial Forecasting, Planning, and Budgeting Financial Forecasting Limitations of the Percent of Sales Forecast Method The Sustainable Rate of Growth Financial Planning and Budgeting How Financial Managers Use This Material Summary Part 2: Valuation of financial assets chapter 5 The Time Value of Money Compound Interest and Future Value Compound Interest with Nonannual Periods Annuities?A Level Stream Annuities Due Present Value of Complex Stream Perpetuities and Infinite Annuities Making Interest Rates Comparable The Multinational Firm: The Time Value of Money Summary chapter 6 Risk and Rates of Return Rates of Return in the Financial Markets The Relationship Between Risk and Rates of Return The Effects of Inflation on Rates of Return and the Fisher Effect The Term ?Structure of Interest Rates? Expected Return Risk Risk and Diversification Measuring Market Risk Measuring a Portfolio?s Beta The Investor?s Required Rate of Return Summary chapter 7 Valuation and Characteristics of Bonds Types of Bonds Terminology and Characteristics of Bonds Definitions of Value Determinants of Value Valuation: The Basic Process Bond Valuation The Bondholder?s Expected Rate of Return (Yield to Maturity) Bond Valuation: Five Important Relationships How Financial Managers Use This Material Summary chapter 8 Stock Valuation Features and Types of Preferred Stock Valuing Preferred Stock Characteristics of Common Stock Valuing Common Stock Stockholder?s Expected Rate of Return How Financial Managers Use This Material Summary Part 3: Investment in long-term assets chapter 9 Finding Profitable Projects Payback Period Net Present Value Profitability Index (Benefit/Cost Ratio) Internal Rate of Return Ethics in Capital Budgeting A Glance at Actual Capital-Budgeting Practices The Multinational Firm: Capital Budgeting How Financial Managers Use This Material Summary chapter 10 Cash Flows and Other Topics in Capital Budgeting Guidelines for Capital Budgeting An Overview of the Calculations of a Project?s Free Cash Flows Complications in Capital Budgeting: Capital Rationing and Mutually Exclusive Projects How Financial Managers Use This Material The Multinational Firm: The International Complications in Calculating Expected Free Cash Flows Summary chapter 11 Capital Budgeting and Risk Analysis Risk and the Investment Decision Methods for Incorporating Risk into Capital Budgeting Other Approaches to Evaluating Risk in Capital Budgeting How Financial Managers Use This Material The Multinational Firm: Capital Budgeting and Risk Summary chapter 12 Cost of Capital The Cost of Capital: Key Definitions and Concepts Determining Individual Costs of Capital The Weighted Average Cost of Capital Cost of Capital in Practice: Briggs & Stratton Calculating Divisional Costs of Capital: PepsiCo, Inc. Using a Firm?s Cost of Capital to Evaluate New Capital Investments How Financial Managers Use This Material Summary chapter 13 Managing for Shareholder Value Who Are the Top Creators of Shareholder Value? Business Valuation?The Key to Creating Shareholder Value Value Drivers Economic Value Added (EVA) Paying for Performance Linking Incentive Compensation to Performance How Financial Managers Use This Material Summary Part 4: Capital structure and dividend policy chapter 14 Raising Capital in the Financial Markets The Financial Manager, Internal and External Funds, and Flexibility The Mix of Corporate Securities Sold in the Capital Market Why Financial Markets Exist Financing of Business: The Movement of Funds Through the Economy Components of the U.S. Financial Market System The Investment Banker More on Private Placements: The Debt Side Flotation Costs How Financial Managers Use This Material Summary chapter 15 Analysis and Impact of Leverage Business and Financial Risk Break-Even Analysis Operating Leverage Financial Leverage Combination of Operating and Financial Leverage The Multinational Firm: Business Risk and Global Sales How Financial Managers Use This Material Summary chapter 16 Planning the Firm?s Financing Mix Key Terms and Getting Started A Glance at Capital Structure Theory Basic Tools of Capital Structure Management The Multinational Firm: Beware of Currency Risk How Financial Managers use this Material Summary chapter 17 Dividend Policy and Internal Financing Dividend Payment Versus Profit Retention Does Dividend Policy Affect Stock Price?4 The Dividend Decision in Practice Dividend Payment Procedures Stock Dividends and Stock Splits Stock Repurchases The Multinational Firm: The Case of Low Dividend Payments?So Where Do We Invest? How Financial Managers Use this Material Summary Part 5: Working-Capital management and special topics in finance chapter 18 Working-Capital Management and Short-Term Financing Managing Current Assets and Liabilities Working-Capital Management and the Risk-Return Trade-Off Advantages of Current Liabilities: The Return Appropriate level of Working Capital Hedging Principles Calculate a Firm?s Cash Conversion Cycle and Interpret Its Component Parts Estimation of the Cost of Short-Term Credit Sources of Short-Term Credit Summary chapter 19 Cash and Marketable Securities Management What are Liquid Assets? Why a Company Holds Cash Cash-Management Objectives and Decisions Collection and Disbursement Procedures Composition of Marketable Securities Portfolio The Multinational Firm: The Use of Cash and Marketable Securities How Financial Managers Use this Material Summary chapter 20 Accounts Receivable and Inventory Management Accounts Receivable Management Inventory Management TQM and Inventory-Purchasing Management: The New Supplier Relationships How Financial Managers use this Material Summary chapter 21 Risk Management Futures Options Currency Swaps The Multination Firm and Risk Management How Financial Managers Use This Material Summary chapter 22 International Business Finance The Globalization of Product and Financial Markets Exchange Rates Interest-Rate Parity Theory Purchasing Power Parity Exposure to Exchange Rate Risk Multinational Working-Capital Management International Financing and Capital-Structure Decisions Direct Foreign Investment How Financial Managers use this Material Summary chapter 23 Corporate Restructuring: Combinations and Divestitures Why Mergers Might Create Wealth Determination of a Firm?s Value Divestitures How Financial Managers Use this Material Summary chapter 24 Term Loans and Leases Term Loans Leases How Financial Managers use this Material Summary Appendixes 000 Glossary 000 Indexes 000
Library of Congress Subject Headings for this publication: Business enterprises Finance, Corporations Finance