Publisher: Thomson, 1999, 601 pages

ISBN: 0-538-85395-6

Keywords: Finance

An Ideal Resource for Managers

- A focus on value creation improves your ability to make smart financial decisions.
- Each topic is approached from a problem-solving perspective. You will learn to solve the practical financial problems that executives face every day.
- Self-contained chapters make the text an ideal quick reference guide to finance. Review questions — with detailed answers — make it a valuable self-study tool.
- The distinguished author team shares their extensive experience teaching executives around the world.

**Chapter 1: Financial Management and Value Creation: An Overview**- The Key Question: Will Your Decison Create Value?
- The Fundamental Finance Principle
- Applying the Fundamental Finance Principle
- The Role of Financial Markets
- How Can a Firm Grow?
- HLC's Financial Statements
- How Profitable Is HLC?
- How Much Cash Has HLC Generated?
- How Risky Is HLC?
- Is HLC Creating Value?
- Summary
- References and Further Reading
- Review Problems
**Chapter 2: Understanding Balance Sheets and Income Statements**- Financial Accounting Statements
- The Balance Sheet
- The Income Statement
- Reconciling Balance Sheets and Income Statements
- The Structure of the Owner's Equitty Account
- Summary
- References and Further Reading
- Review Problems
**Chapter 3: Assessing Liquidity and Operational Efficiency**- The Managerial Balance Sheet
- The Matching Strategy
- A Measure of Liquidity based on the Funding Structure of Working Capital Requirement
- Improving Liquidity through Better Management of the Operating Cycle
- Traditional Measures of Liquidity
- Summary
**Appendix 3.1: Financing Strategies**- References and Further Reading
- Review Problems
**Chapter 4: Measuring Cash Flow**- Cash Flows and Their Sources
- Preparing a Detailed Cash Flow Statement
- Two Variations of the Cash Flow Statement
- Bankers' Cash Flow versus Net Operating Cash Flow
- Managerial Implications
- Summary
**Appendix 4.1: Obtaining the Net Operating Cash Flow from Balance Sheet and Income Statement Accounts**- References and Further Reading
- Review Problems
**Chapter 5: Diagnosing Profitability, Risk and Growth**- Measures of Profitability
- Return on Equity
- Other Measures of Profitability
- Financial Leverage and Risk
- Self-Sustainable Growth
- Summary
**Appendix 5.1: Factors Affecting a Firm's Operating Profitability**- Market Share
- Perceived Product Quality
- Assets and Cost Structures
**Appendix 5.2: The Relationship Between a Firm's ROE and Its Aftertax ROIC**- References and Further Reading
- Review Problems
**Chapter 6: Using the Net Present Value Rule to Make Value-Creating Investment Decisions**- The Capital Investment Process
- Would You Buy This Parcel of Land?
- The Net Present Value Rule
- Applying the Net Present Value Rule to a Capital Investment Decision
- Why NPV Rule Is a Good Investment Rule
- Special Cases of Capital Budgeting
- Limitations of the Net Present Value Criterion
- Summary
**Appendix 6.1: Calculation of the Present Value of an Annuity and the Constant Annual-Equivalent Cash Flow of a Project's Cash Flow Stream**- References and Further Reading
- Review Problems
**Chapter 7: Alternatives to the Net Present Value Rule**- The Payback Period
- The Discounted Payback Period
- The Internal Rate of return (IRR)
- The Profitability Index (PI)
- Summary
- References and Further Reading
- Review Problems
**Chapter 8: Identifying and Estimating a Projects Cash Flows**- The Actual Cash-Flow Principle
- The With/Without Principle
- The Designer Desk Lamp Project
- Identifying a Project's Relevant cash Flows
- Estimating a Project's Relevant cash Flows
- Should SMC Launch the New Product?
- Summary
- References and Further Reading
- Review Problems
**Chapter 9: Raising Capital and valuing Securities**- Estimating the Amount of Required External Funds
- The Financial System: Its Structure and Functions
- How Firms Issue Securities
- Debt Capital: Characteristics and Valuation
- Equity Capital: Characteristics and Valuation
- Summary
**Appendix 9.1: The Bond Valuation Formula****Appendix 9.2: The Valuation Formula for the Constant Growth Dividend Model**- References and Further Reading
- Review Problems
**Chapter 10: Estimating the Cost of Capital**- Identifying Proxy or Pure-Play Firms
- Estimating the Cost of Debt
- Estimating the Cost of Equity: The Dividend Discount Model
- Estimating the Cost of Equity: The Capital Asset Pricing Model
- Estimating the Cost of Capital of a Firm
- Estimating the Cost of Capital of a Project
- Summary
- References and Further Reading
- Review Problems
**Chapter 11: Designing a Capital Structure**- The Capital Structure Decision: No Corporate Taxes and No Financial Distress Costs
- Effect of Changes in Capital Structure on the Firm's Value: The Pizza Theory
- The Capital Structre Decision: Corporate Income Taxes and No Financial Distress Costs
- The Capital Structure Decision When Financial Distress Is Costly
- Formulating a Capital Structure Policy
- Summary
- References and Further Reading
- Review Problems
**Chapter 12: Valuing and Acquiring a Business**- Alternative Valuation Models
- Valuing a Firm's Equity Using Comparables
- Valuing a Firm's Assets and Equity Using the Discounted Cash Flow Approach
- Estimating the DCF Value of OS Distributors' Assets and Equity
- Estimating the Acquisition Value of OS Distributors
- Estimating the Leveraged Buyout Value of OS Distributors
- Summary
**Appendix 12.1: The Dividend Discount Model Approach to the Valuation of a Firm's Equity**- References and Further Reading
- Review Problems
**Chapter 13: Making Value-Creating Decisions in an International Environment**- The Firm's Risk Exposure from Foreign Operations
- The Foreign Exchange Market
- Hedging Contractual Exposure to Currency Risk
- Hedging Long-Term Contractual Exposure to Currency Risk with Swaps
- The Relationship among Exchange Rates, Inflation Rates, and Interest Rates
- Analyzing an International Investment Project
- Managing Country Risk
- Summary
**Appendix 13.1: Translating Financial Statement With the Monetary/Nonmonetary Method and the Current Method****Appendix 13.2: The Parity Relations**- References and Further Reading
- Review Problems
**Chapter 14: Managing for Value Creation**- Measuring Value Creation
- Identifying the Drivers of Value Creation
- Linking Operating Performance and Remuneration to Value Creation
- Linking the Capital Budgeting Process to Value Creation
- Putting It All Together: The Financial Strategy Matrix
- Summary
**Appendix 14.1: Adjusting Book Values to Estimate the Amount of Invested Equity Capital and Operating Profit****Appendix 14.2: Estimating Market Value Added (MVA) When Future Cash Flows are Expected to Grow at a Constant Rate in Perpetuity**- References and Further Reading
- Review Problems
**Answers to Review Problems**

An Ideal Resource for Managers

The financial part of an MBA, explained so that senior managers can understand why and how. Highly recommended.

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