Analysis for Financial Management 6th Ed.

Robert C. Higgins

Publisher: McGraw-Hill, 2001, 412 pages

ISBN: 0-07-231531-8

Keywords: Finance

Last modified: July 11, 2021, 2:35 p.m.


  • PowerPoint slides help students study more efficiently, and lets instructors customize lectures
  • Five times more websites for quick access of additional information
  • New sections in Chapter 2 on international variations
  • Added section in Chapter 5 lets students estimate the value of their employee stock options
  • More in Chapter 6 on the agency perspective in capital structure decisions
  • More in Chapter 7 on the relevant costs and benefits in investment appraisal


  • Modern emphasis on market efficiency, beta risk, and market signaling
  • Clear and simple presentation of sustainable growth
  • Thorough discussion of cash flows, based on objective data
  • Part I: Assessing the Financial Health of the Firm
    1. Interpreting Financial Statements
      • The Cash Flow Cycle
      • The Balance Sheet
        • Current Assets and Liabilities
        • Shareholders' Equity
      • The Income Statement
        • Measuring Earnings
      • Sources and Uses Statements
        • The Two-Finger Approach
      • The Cash Flow Statement
      • Financial Statements and the Value Problem
        • Market Value versus Book Value
        • Economic Income versus Accounting Income
      • Chapter Summary
      • Additional Resources
      • Chapter Problems
    2. Evaluating Financial Performance
      • The Levers of Financial Performance
      • Return on Equity
        • The Three Determinants of ROE
        • The Profit Margin
        • Asset Turnover
        • Financial Leverage
      • Is ROE a Reliable Financial Yardstick?
        • The Timing Problem
        • The Risk Problem
        • The Value Problem
        • ROE or Market Price?
      • Ratio Analysis
        • Using Rations Effectively
        • Ratio-Analysis of The Timberland Company
      • Appendix: International Differences in Financial Structure
        • Percentage Balance Sheet
        • Comparisons among Publicly Traded Companies
        • International Accounting Differences
      • Chapter Summary
      • Additional Resources
      • Chapter Problems
  • Part II: Planning Future Financial Performance
    1. Financial Forecasting
      • Pro Forma Statements
        • Percent-of-Sales Forecasting
      • Pro Forma Statements and Financial Planning
        • Sensitivity Analysis
        • Scenario Analysis
        • Interest Expense
        • Seasonality
        • Forecasting with Computer Spreadsheets
        • Simulation
      • Cash Flow Forecasts
      • Cash Budgets
      • The Techniques Compared
      • Planning in Large Companies
      • Chapter Summary
      • Additional Resources
      • Chapter Problems
    2. Managing Growth
      • Sustainable Growth
        • The Sustainable Growth Equation
      • Too Much Growth
        • Balanced Growth
        • Triad Guarantee's Sustainable Growth Rate
        • "What If" Questions
      • What to do When Actual Growth Exceeds Sustainable Growth
        • Sell New Equity
        • Increase Leverage
        • Profitable Pruning
        • Sourcing
        • Pricing
        • Is Merger the Answer?
      • Too Little Growth
      • What to do When Sustainable Growth Exceeds Actual Growth
        • Ignore the problem
        • Return the Money to Shareholders
        • Buy Growth
        • Sustainable Growth and Inflation
      • Sustainable Growth and Pro Forma Forecasts
      • Chapter Summary
      • Additional Resources
      • Chapter Problems
  • Part III: Financing Operations
    1. Financial Instruments and Markets
      • Financial Instruments
        • Bonds
        • Common Stock
        • Preferred Stock
      • Financial Markets
        • Private Placement or Public Issue?
        • Exchanges and Over-the-Counter Markets
        • International Financial Markets
        • Investment Banking
        • Issue Costs
        • Regulatory Changes
      • Efficient Markets
        • What Is an Efficient Market?
        • Implications of Efficiency
      • Appendix: Forward Contracts, Options, and the Management of Corporate Risk
        • Forward Markets
        • Hedging in Money and Capital Markets
        • Hedging with Options
        • Limitations of Financial Market Hedging
        • Valuing Options
      • Chapter Summary
      • Additional Resources
      • Chapter Problems
    2. The Financing Decision
      • Financial Leverage
      • Techniques for Analyzing Financing Alternatives
        • Leverage and Risk
        • Leverage and Earnings
      • How Much to Borrow
        • Tax Benefits and Distress Costs
        • Flexibility and Market Signaling
        • The Financing Decision and Sustainable Growth
      • Selecting a Maturity Structure
        • Inflation and Financing Strategy
      • Appendix: The Irrelevance Proposition
        • No Taxes or Distress Costs
        • Taxes but Still No Distress Costs
      • Chapter Summary
      • Additional Resources
      • Chapter Problems
  • Part IV: Evaluating Investment Opportunities
    1. Discounted Cash Flow Techniques
      • Figures of Merit
        • The Payback Period and the Accounting Rate of Return
        • The Time Value of Money
        • Equivalence
        • The Net Present Value
        • The Benefit-Cost Ratio
        • The Internal Rate of Return
        • Calculating NPVs, IRRs, and BCRs with a Computer Spreadsheet
        • Bound Valuation: An Example of NPV and IRR Calculations
        • Mutually Exclusive Alternatives and Capital Rationing
      • Determining the Relevant Cash Flows
        • Depreciation
        • Working Capital and Spontaneous Sources
        • Sunk Costs
        • Allocated Costs
        • Excess Capacity
        • Financing Costs
      • Appendix: Mutually Exclusive Alternatives and Capital Rationing
        • What Happened to the Other $578,000?
        • Unequal Lives
        • Capital Rationing
        • The Problems of Future Opportunities
        • A Decision Tree
      • Chapter Summary
      • Additional Resources
      • Chapter Problems
    2. Risk Analysis om Investment Decisions
      • Risk Defined
      • Estimated Investment Risk
        • Three Techniques for Estimating Investment Risk
      • Including Risk in Investment Evaluation
        • Risk-Adjusted Discount Rates
      • The Cost of Capital
        • The Cost of Capital Defined
        • Timberland Company's Cost of Capital
        • The Cost of Capital in Investment Approaisal
        • Multiple Hurdle Rates
      • Four Pitfalls in the Use of Discounted Cash Flow Techniques
        • The Enity Perspective versus the Equity Perspective
        • Inflation
        • Real Options
        • Excessive Risk Adjustment
      • Economic Value Added
        • EVA and Investment Analysis
        • EVA's Appeal
      • A Cautionary Note
      • Appendix: Diversification and β-Risk
        • Diversification
        • Measuring Beta
        • Using Beta in Investment Evaluation
        • Beta Risk and Conglomerate Diversification
      • Chapter Summary
      • Additional Resources
      • Chapter Problems
    3. Business Valuation and Corporate Restructuring
      • Valuing a Business
        • Assets or Equity?
        • Dead or Alive?
        • Minority Interest or Control?
      • Discounted Cash Flow Valuation
        • Free Cash Flow
        • The Terminal Value
        • A Numerical Example
        • Problems with Present Value Approaches to Valuation
      • Valuation Based on Comparable Trades
        • Lack of Marketability
      • The Market for Control
        • The Premium for Control
        • Financial Reasons for Restructuring 
        • The Empirical Evidence
        • The AT&T — McCaw Merger
      • Chapter Summary
      • Additional Resources
      • Chapter Problems
  1. Present Value of $1 in Year N, Discounted at Discount Rate K
  2. Present Value of an Annuity of $1 for N Years, Discounted at Rate K


Analysis for Financial Management

Reviewed by Roland Buresund

Very Good ******** (8 out of 10)

Last modified: May 21, 2007, 2:54 a.m.

A book that every prospective MBA should have, as it is very clear and gives a lot of resource listings and examples. Recommended for anyone that need to deal with financial issues.

What makes it even better, is that it lives up to its back cover: it turns Finance into Management, or at least tries very hard to show what a CFOs life is really about, in practical examples.

Very strongly recommended for people that need to understand what being a CFO is about (all prospective MBAs) or people that need to understand what choices sometimes have to be made in finance.


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