PARTⅠ INTRODUCTION TO FINANCIAL MANAGEMENT 1
CHAPTER 1·THE ROLE OF FINANCIAL MANAGEMENT 1
THE ROLE OF FINANCIAL MANAGEMENT 1
CHAPTER 1
INTRODUCTION TO FINANCIAL MANGEMENT 1
PRAT 1 1
What is Financial Management 2
Introductiion 2
The Goal of the Firm 3
Organization of the Financlal Management Function 6
Organization of the Book 7
Summary 10
Questions 10
Selected References 11
CHAPTER 2·THE BUSINESS, TAX, AND FINANCIAL ENVIRONMENTS 12
CHAPTER 2 12
THE BUSINESS, TAX, AND FINANCIAL ENVIRONMENTS 12
The Business Environment 13
The Tax Environment 15
Financial Statemients 21
The Financial Environment 21
Summary 30
Questions 31
Self-Correction Problems 32
Solutions fo Self-Correction Problems 33
Problems 33
Selected References 34
CHAPTER 3·THE TIME VALUE OF MONEY 35
PARTⅡ 35
VALUATION 35
CHAPTER 3 35
THE TIME VALUE OF MONEY 35
PARTⅡ VALUATION 35
The Interest Rate 36
Simple Interest 36
Compound Interest 37
Generating Investment Project Proposals 37
Compounding More Than Once a Year 50
Amortizing a Loan 54
Summary 56
Self-Correction Problems 57
Questions 57
Problems 58
Solutions to Self-Correction Problems 62
Selected References 64
THE VALLIATION OF LONG-TERM SECURMES 65
CHAPTER 4·THE VALUATION OF LONG-TERM SECURITIES 65
CHAPTER 4 65
Distinctions Among Valuation Concepts 66
Bond Valuation 67
Prefered Stock Valuation 70
Common Stock Valuation 71
Rates of Return（or Yields） 76
Summary Table of Key Present Value Formulas for Valuing Long-Term Securities 81
Summary 81
Questions 82
Self-Correction Problems 83
Problems 84
Solutions to Self-Correction Problems 86
Selected References 88
CHAPTER 5·RISK AND RETURN 89
RISK AND RETURN 89
CHAPTER 5 89
Defining Risk and Return 90
Using Probability Distributions to Measure Risk 91
Attiludes Toward Risk 94
Risk and Return in a Portfolio Context 95
Diversification 97
The Capital-Asset Pricing Model 99
Summary 108
Appendix A：Measuring Portfolio Risk 109
Appendix B：Arbitrage Pricing Theory 111
Questions 114
Self-Correction Problems 114
Problems 115
Solutions to Self-Correction Problems 117
Selected References 118
CHAPTER 6·FINANCIAI STATEMENT ANALYSIS 120
CHAPTER 6 120
FINANCIAL STATEMENT ANALYSIS 120
PART Ⅲ 120
TOOLS OF FINANCIAL ANALYSIS AND PLANNING 120
PARTⅢ TOOLS OF FINANCIAL ANALYSIS AND PLANNING 120
A Possible Framework for Analysis 124
Balance Sheet Ratios 129
Income Statement and Income Statement/Batance Sheet Ratios 132
Trend Analysis 144
Common-Size and Index Analysis 145
Summary 148
Summary of Key Ratios 149
Appendix：Deferred Taxes and Financial Analysis 150
Questions 152
Self-Correcton Problems 153
Problems 155
Solutions to Self-Correction Problems 159
Selected References 162
CHAPTER 7 164
FUNDS ANALYSIS, CASH-FLOW ANALYSIS, AND FINANCIAL PLANNING 164
CHAPTER 7·FUNDS ANALYSIS, CASH-FLOW ANALYSIS, AND FINANCIAL PLANNING 164
Flow of Funds（Sources and Uses）Statement 165
Accounting Statement of Cash Flows 172
Cash-Flow Forecasting 176
Range of Cash-Flow Estimates 181
Forecastin Financial Statements 182
Summary 186
Appendix：Sustainable Growth Modeling 187
Questions 192
Self-Correction Problems 193
Problems 195
Solutons to Self-Correction Problems 198
Selected References 202
CHAPTER 8·OVERVIEW OF WORKING CAPITAL MANAGEMENT 203
PART Ⅳ 203
WORKING CAPITAL MANAGEMENT 203
CHAPTER 8 203
OVERVIEW OF WORKING CAPITAL MANAGEMENT 203
PARTⅣ WORKING CAPITAL MANAGEMENT 203
Introduction 204
Working Capital Issues 205
Financing Current Assets：Short-Term and Long-Term Mix 208
Combining Liability Structure and Current Asset Decisions 213
Summary 214
Questions 215
Self-Correction Problems 215
Problems 216
Solutions to Self-Correction Problems 217
Selected References 218
CHAPTER 9 219
CASH AND MARKETABLE SECURITIES MANAGEMENT 219
CHAPTER 9·CASH AND MARKETABLE SECURITIES MANAGEMENT 219
Motives for Holding Cash 220
Speeding Up Cash Receipts 221
S-l-o-w-i-n-g D-o-w-n Cash Payouts 225
Electronic Commerce 228
Outsourcing 229
Cash Balance to Maintain 230
Investment in Marketable Securities 231
Summary 239
Questions 240
Self-Correction Problems 241
Problems 242
Solutions to Self-Correction Problems 243
Selected References 244
CHAPTER 10·ACCOUNTS RECEIVABLE AND INVENTORY MANAGEMENT 245
ACCOUNTS RECEIVABLE AND INVENTORY MANAGEMENT 245
CHAPTER 10 245
Credit and Collection Policies 246
Analyzing the Credit Applicant 253
Inventory Management and Control 259
Summary 269
Questions 270
Self-Correction Problems 270
Problems 271
Solutions to Self-Correction Problems 275
Selected References 276
CHAPTER 11·SHORT-TERM FINANCING 278
CHAPTER 11 278
SHORT-TERM FINANCING 278
Spontaneous Financing 279
Negotiated Financing 284
Factoring Accounts Receivable 296
Composition of Short-Term Financing 298
Summary 299
Questions 300
Self-Correction Problems 301
Problems 302
Solutions to Self-Correction Problems 304
Selected References 305
PART Ⅴ 306
INVESTMENT IN CAPITAL ASSETS 306
CHAPTER 12 306
CAPITAL BUDGETING AND ESTIMATIG CASH FLOWS 306
CHAPTER 12·CAPITAL BUDGETING AND ESTIMATING CASH FLOWS 306
PARTⅤ INVESTMENT IN CAPITAL ASSETS 306
The Capitl Budgeting Process：An Overview 307
Estimating Project″After-Tax Incremental Operating Cash Flows″ 308
Questions 318
Summary 318
Problems 319
Self-Correction Problems 319
Solutions to Self-Correction Problems 321
Selected References 323
CAPITAL BUDGETING TECHNIQUES 324
CHAPTER 13 324
CHAPTER 13·CAPITAL BUDGETING TECHNIQUES 324
Project Evaluation and Selection：Alternative Methods 325
Potential Difficulties 331
Summary 340
Project Monitoring：Progress Reviews and Post-Completion Audits 340
Appendix A：Multiple Intermal Rates of Return 344
Appendix B：Replacement Chain Analysis 344
Questions 346
Self-Correcton Problems 346
Problems 348
Solutions to Self-Correction Problems 350
Selected References 351
CHAPTER 14·RISK AND MANAGERIAL OPTIONS IN CAPITAL BUDGETING 353
CHAPT ER 14 353
RISK AND MANAGERIAL OPTIONS IN CAPITAL BUDGETING 353
The Problem of Project Risk 354
Total Project Risk 358
Contribution to Toatl Firm Risk：Firm-Portfolio Approach 366
Managerial Options 370
Summary 375
Questions 376
Self-Correction Problems 376
Problems 378
Solutions to Self-Correction Problems 381
Selected References 383
CHAPTER 15 385
REQUIRED RETURNS AND THE COST OF CAPITAL 385
PARTⅥ THE COST OF CAPITAL, CAPITAL STRUCTURE, AND DIVIDEND POLICY 385
THE COST OF CAPITAL, CAPITAL STRUCTURE, AND DIVIDEND POLICY 385
PART Ⅵ* 385
CHAPTER 15·REQUIRED RETURNS AND THE COST OF CAPITAL 385
Creation of Value 386
Overall Cost of Capital of the Firm 387
The CAPM：Project-Specific and Group-Specific Required Rates of Return 399
Evaluation of Projects on the Basis of Their Total Risk 405
Summary 409
Appendix A：Adjusting the Beta for Financial Leverage 410
Appendix B：Adjusted Present Value 412
Questions 414
Self-Correction Problems 415
Problems 416
Solutions to Self-Correction Problems 420
Selected References 422
CHAPTER 16·OPERATING AND FINANCIAL LEVERAGE 424
CHAPTER 16 424
OPERATING AND FINANCIAL LEVERAGE 424
Operating Leverage 425
Financial Leverage 432
Total Leverage 441
Cash-Flow Ability to Service Debt 442
Other Methods of Analysis 445
Combination of Methods 447
Summary 448
Questions 449
Self-Correction Problems 450
Problems 452
Solutions to Self-Correction Problems 454
Selected References 458
CHAPTER 17·CAPITAL STRUCTURE DETERMINATION 459
CHAPTER 17 459
CAPITAL STRUCTURE DETERMINATION 459
A Conceptual Look 460
The Total-Value Principle 464
Presence of Market Imperfections and Incentive Issues 467
The Effect of Taxes 469
Evaluating Lease Financing in Relation to Debt Financing 471
Taxes and Market Imperfections Combined 472
Financial Signaling 473
Summary 474
Questions 475
Self-Correction Problems 475
Problems 476
Solutions to Self-Correction Problems 479
Selected References 480
CHAPTER 18·DIVIDEND POLICY 482
CHAPTER 18 482
DIVIDEND POLICY 482
Passive versus Active Dividend Policy 483
Factors Influencing Dividend Policy 488
Dividend Stability 491
Stock Dividends and Stock Splits 494
Stock Repurchase 498
Administrative Considerations 502
Summary 503
Questions 505
Self-Correction Problems 506
Problems 507
Solutions to Self-Correction Problems 510
Selected References 511
PARTⅦ INTERMEDIATE AND LONG-TERM FINANCING 514
CHAPTER 19·THE CAPITAI MARKET 514
PART Ⅶ 514
INTERMEDIATE AND LONG-TERM FINANCING 514
CHAPTER 19 514
THE CAPITAL MARKET 514
Deja Vu All Over Again 515
Public Issue 515
Privileged Subscription 518
Regulation of Security Offerings 522
Private Placement 525
Intial Financing 527
Signaling Effects 528
The Secondary Market 530
Summary 530
Questions 531
Self-Correction Problems 532
Problems 532
Solutions to Self-Correction Problems 533
Seleted Reference 534
CHAPTER 20·LONG-TERM DEBT, PREFERRED STOCK, AND COMMON STOCK 536
CHAPT ER 20 536
LONG-TERM DEBT, PREFERRED STOCK, AND COMMON STOCK 536
Bonds and Their Features 537
Types of Long-Term Debt Instruments 538
Retirement of Bonds 540
Preferred Stock and Its Features 543
Common Stock and Its Features 546
Rights to Common Shareholders 547
Dual-Class Common Stock 550
Summary 550
Appendix：Refunding aBond Issue 551
Questions 554
Self-Correction Problems 555
Problems 556
Solutions to Self-Correction Problems 558
Selected References 559
CHAPTER 21·TERM LOANS AND LEASES 561
TERM LOANS AND LEASES 561
CHAPTER 21 561
Term Loans 562
Provisions of Loan Agreements 564
Equipment Financing 566
Lease Financing 567
Summary 576
Appendix：Accounting Treatment of Leases 576
Self-Correction Problems 579
Questions 579
Problems 580
Solutions to Self-Correction Problems 582
Selected References 584
PART Ⅷ 586
SPECIAL AREAS OF FINANCIAL MANAGEMENT 586
CHAPTER 22 586
CONVERTIBLES, EXCHANGEABLES, AND WARRANTS 586
PARTⅧ SPECIAL AREAS OF FINANCIAL MANAGEMENT 586
CHAPTER 22·CONVERTIBLES, EXCHANGEABLES, AND WARRANTS 586
Convertible Security Features 587
Use of Convertibles 588
Value of Convertible Securities 591
Exchangeable Bonds 594
Warrants 595
Summary 598
Appendix：Option Pricing 599
Questions 606
Self-Correction Problems 607
Problems 607
Solutiions to Self-Correction Problems 610
Selected References 611
CHAPTER 23 613
MERGERS AND OTHER FORMS OF CORPORATE RESTRUCTURING 613
CHAPTER 23·MERGERS AND OTHER FORMS OF CORPORATE RESTRUCTURING 613
Sources of Value 614
Strategic Acquisititions Involving Common Stock 617
Acquisitions and Capital Budgeting 623
Closing the Deal 625
Takeovers, Tender Offers, and Defenses 628
Strategic Alliances 631
Divestiture 632
Ownership Restructuring 634
Leveraged Buyouts 635
Summary 637
Appendix：Remedies for a Failing Company 638
Questions 643
Problems 644
Self-Correction Problems 644
Solutions to Self-Correction Problems 651
Selected References 653
CHAPTER 24 656
INTERNATIONL FINANCIAL MANAGEMENT 656
CHAPTER 24·INTERNATIONAL FINANCIAL MANAGEMENT 656
Some Background 657
Types of Exchange-Rate Risk Exposure 661
Management of Exchange-Rate Risk Exposure 666
Structuring Intermational Trade Transactions 677
Summary 681
Questions 682
Self-Correction Problems 683
Problems 684
Solutions to Self-Correction Problems 686
Selected References 688
APPENDIX 689
TableⅠ：Future value interest factor 690
APPENDIX 690
TableⅡ：Present value interest factor 692
TableⅢ：Future value interest factorof an (ordinary)annuity 694
TableⅣ：Present value interest factor of an (ordinary) annuity 696
TableⅤ：Area of normal distribution that is Z standard deviations to the left or right of the mean 698
GLOSSARY 699
INDEX 719
INDEX 719
COMMONLY USED SYMBOLS 736
COMMONLY USED SYMBOLS 736