Part 1 Introduction to Financial Management

1 The Role of Financial Management

Objectives

Introduction

What Is Financial Management？

The Goal of the Firm

Corporate Governance

Organization of the Financial Management Function

Organization of the Book

Key Learning Points

Questions

Selected References

2 The Business， Tax， and Financial Environments

Objectives

The Business Environment

The Tax Environment

The Financial Environment

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

Part 2 Valuation

3 The Time Value of Money

Objectives

The Interest Rate

Simple Interest

Compound Interest

Compounding More Than Once a Year

Amortizing a Loan

Summary Table of Key Compound Interest Formulas

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

4 The Valuation of Long-Term Securities

Objectives

Distinctions Among Valuation Concepts

Bond Valuation

Preferred Stock Valuation

Common Stock Valuation

Rates of Return 〔or Yields〕

Summary Table of Key Present Value Formulas for Valuing Long-Term Securities

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

5 Risk and Return

Objectives

Defining Risk and Return

Using Probability Distributions to Measure Risk

Attitudes Toward Risk

Risk and Return in a Portfolio Context

Diversification

The Capital-Asset Pricing Model 〔CAPM〕

Efficient Financial Markets

Key Learning Points

Appendix A： Measuring Portfolio Risk

Appendix B： Arbitrage Pricing Theory

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

Part 3 Tools of Financial Analysis and Planning

6 Financial Statement Analysis

Objectives

Financial Statements

A Possible Framework for Analysis

Balance Sheet Ratios

Income Statement and Income Statement/Balance Sheet Ratios

Trend Analysis

Common-Size and Index Analysis

Key Learning Points

Summary of Key Ratios

Appendix： Deferred Taxes and Financial Analysis

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

7 Funds Analysis， Cash-Flow Analysis， and Financial Planning

Objectives

Flow of Funds 〔Sources and Uses〕 Statement

Accounting Statement of Cash Flows

Cash-Flow Forecasting

Range of Cash-Flow Estimates

Forecasting Financial Statements

Key Learning Points

Appendix： Sustainable Growth Modeling

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

Part 4 Working Capital Management

8 Overview of Working Capital Management

Objectives

Introduction

Working Capital Issues

Financing Current Assets： Short-Term and Long-Term Mix

Combining Liability Structure and Current Asset Decisions

Key Learning Points

Questions

Self-Correction Problem

Problems

Solutions to Self-Correction Problem

Selected References

9 Cash and Marketable Securities Management

Objectives

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

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

10 Accounts Receivable and Inventory Management

Objectives

Credit and Collection Policies

Analyzing the Credit Applicant

Inventory Management and Control

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

11 Short-Term Financing

Objectives

Spontaneous Financing

Negotiated Financing

Factoring Accounts Receivable

Composition of Short-Term Financing

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

Part 5 Investment in Capital Assets

12 Capital Budgeting and Estimating Cash Flows

Objectives

The Capital Budgeting Process： An Overview

Generating Investment Project Proposals

Estimating Project “After-Tax Incremental Operating Cash Flows”

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

13 Capital Budgeting Techniques

Objectives

Project Evaluation and Selection： Alternative Methods

Potential Difficulties

Project Monitoring： Progress Reviews and Post-Completion Audits

Key Learning Points

Appendix A： Multiple Internal Rates of Return

Appendix B： Replacement Chain Analysis

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

14 Risk and Managerial 〔Real〕 Options in Capital Budgeting

Objectives

The Problem of Project Risk

Total Project Risk

Contribution to Total Firm Risk： Firm-Portfolio Approach

Managerial 〔Real〕 Options

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

Part 6 The Cost of Capital， Capital Structure， and Dividend Policy

15 Required Returns and the Cost of Capital

Objectives

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

Key Learning Points

Appendix A： Adjusting the Beta for Financial Leverage

Appendix B： Adjusted Present Value

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

16 Operating and Financial Leverage

Objectives

Operating Leverage

Financial Leverage

Total Leverage

Cash-Flow Ability to Service Debt

Other Methods of Analysis

Combination of Methods

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

17 Capital Structure Determination

Objectives

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

Timing and Financial Flexibility

Financing Checklist

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

18 Dividend Policy

Objectives

Passive versus Active Dividend Policies

Factors Influencing Dividend Policy

Dividend Stability

Stock Dividends and Stock Splits

Stock Repurchase

Administrative Considerations

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

Part 7 Intermediate and Long-Term Financing

19 The Capital Market

Objectives

Deja Vu All Over Again

Public Issue

Privileged Subscription

Regulation of Security Offerings

Private Placement

Initial Financing

Signaling Effects

The Secondary Market

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

20 Long-Term Debt， Preferred Stock， and Common Stock

Objectives

Bonds and Their Features

Types of Long-Term Debt Instruments

Retirement of Bonds

Preferred Stock and Its Features

Common Stock and Its Features

Rights of Common Shareholders

Dual-Class Common Stock

Key Learning Points

Appendix： Refunding a Bond Issue

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

21 Term Loans and Leases

Objectives

Term Loans

Provisions of Loan Agreements

Equipment Financing

Lease Financing

Evaluating Lease Financing in Relation to Debt Financing

Key Learning Points

Appendix： Accounting Treatment of Leases

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

Part 8 Special Areas of Financial Management

22 Convertibles， Exchangeables， and Warrants

Objectives

Convertible Securities

Value of Convertible Securities

Exchangeable Bonds

Warrants

Key Learning Points

Appendix： Option Pricing

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

23 Mergers and Other Forms of Corporate Restructuring

Objectives

Sources of Value

Strategic Acquisitions Involving Common Stock

Acquisitions and Capital Budgeting

Closing the Deal

Takeovers， Tender Offers， and Defenses

Strategic Alliances

Divestiture

Ownership Restructuring

Leveraged Buyouts

Key Learning Points

Appendix： Remedies for a Failing Company

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

24 International Financial Management

Objectives

Some Background

Types of Exchange-Rate Risk Exposure

Management of Exchange-Rate Risk Exposure

Structuring International Trade Transactions

Key Learning Points

Questions

Self-Correction Problems

Problems

Solutions to Self-Correction Problems

Selected References

Appendix

Table Ⅰ：Future value interest factor

Table Ⅱ：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 Zstandard deviations to the left or right of the mean

Glossary

Commonly Used Symbols

Index