Financial Management 9th Ed.

Theory and Practice

Euguene F. Brigham, Louis C. Gapenski, Michael C. Ehrhardt

Publisher: Dryden Press, 1999, 1169 pages

ISBN: 0-03-024399-8

Keywords: Finance

Last modified: Dec. 3, 2017, 1:35 a.m.

Continuing the four goals from the first edition, i.e. helping students to make good financial decisions, providing a solid text for the introductory MBA course, motivating students by demonstrating finance is relevant and interesting, and presenting the material clearly, this Ninth Edition promises to be the best yet. Written by a highly-acclaimed, best selling, author team, this text remains the only MBA-level text to present a balance of financial theory and applications.

  • Part I: Introduction to Financial Management
    1. An Overview of Financial Management
      • Career Opportunities in Finance
      • Financial Management in the 1990s
      • Box: McDonald's Looks Overseas
      • The Financial Staff's Responsibilities
      • Alternative Forms of Business Organizatio
      • Finance in the Organizational Structure of the Firm
      • The Goals of the Corporation
      • Box: Are CEOs Overpaid?
      • Business Ethics and Social Responsibility
      • Agency Relationships
      • Organization of the Book
      • Summary
    2. Financial Statements, Cash Flow, and Taxes
      • A Brief History of Accounting and Financial Statements
      • Financial Statements and Reports
      • The Balance Sheet
      • The Income Statement
      • Statement of Retained Earnings
      • Box: Sherlock Holmes, or Corporate Enemy Number 1?
      • Statement of Cash Flows
      • Modifying Accounting Data for Managerial Decisions
      • MVA and EVA
      • Box: Economic Value Added (EVA) — Today's Hottest Financial Idea
      • The Federal Income Tax System
      • Box: Tax Havens
      • Depreciation
      • Summary
    3. Analysis of Financial Statements
      • Ratio Analysis
      • Liquidity Ratios
      • Asset Management Ratios
      • Debt Management Ratios
      • Profitability Ratios
      • Box: International Accounting: Differences Create Headaches for Investors
      • Market Value Ratios
      • Trend Analysis
      • The Value of Operations: Using the Ratios to Guide Managers
      • Tying the Ratios Together: The DuPont Chart and Equation
      • Comparative Ratios and "Benchmarking"
      • Box: ROE Is Soaring to Record Heights
      • Uses and Limitations of Ratio Analysis
      • Looking Beyond the Numbers
      • Box: Financial Analysis in the Small Firm
      • Summary
      • Extensions
    4. The Financial Environment: Markets, Institutions, and Interest Rates
      • The Financial Markets
      • Financial Institutions
      • The Stock Market
      • Box: An Expensive Beer for the NASD
      • The Cost of Money
      • Interest Rate Levels
      • The Determinants of Market Interest Rates
      • Box: A New, Truly Riskless Treasury Bond
      • Investing Overseas
      • The Term Structure of Interest Rates
      • Box: Measuring Country Risk
      • What Determines the Shape of the Yield Curve?
      • Other Factors That Influence Interest Rate Levels
      • Interest Rate Levels and Stock Prices
      • Interest Rates and Business Decisions
      • Summary
  • Part II: Fundamental Concepts
    1. Risk and Return: The Basics
      • Investment Returns
      • Stand-Alone Risk
      • Risk in a Portfoili Context
      • Box: The Trade-Off between Risk and Return
      • Box: The Benefits of Diversifying Overseas
      • The Relationship between Risk and Rates of Return
      • Physical Assets versus Securities
      • Some Concerns about Beta and the CAPM
      • Volatility versus Risk
      • Summary
    2. Risk and Return: Extensions
      • Measuring Portfolio Risk
      • Efficient Portfolios
      • Choosing the Optimal Portfolio
      • The Capital Asset Pricing Model
      • The Capital Market Line
      • Calculating Beta Coefficients
      • Empirical Tests of the CAPM
      • Arbitrage Pricing Theory
      • Summary
      • Extensions
    3. Time Value of Money
      • Time Lines
      • Future Value
      • Present Value
      • Solving for Interest Rate and Time
      • Futire Value of an Annuity
      • Present Value of an Annuity
      • Perpetuities
      • Uneven Cash Flow Streams
      • Semiannual and Other Compounding Periods
      • Comparison of Different Types of Interest Rates
      • Fractional Time Periods
      • Amortized Loans
      • Summary
      • Extensions
  • Part III: Securities and Their Valuation
    1. Bonds and Their Valuation
      • Who Issues Bonds?
      • Key Characteristics of Bonds
      • Bond Valuation
      • Bond Yields
      • Box: Drinking Your Coupons
      • Bonds With Semiannual Coupons
      • Assessing the Riskiness of a Bond
      • Default Risk
      • Box: Santa Fe Bonds Finally Mature after 114 Years
      • Bond Markets
      • Summary
    2. Stocks and Their Valuation
      • Legal Rights and Privileges of Common Stockholders
      • Types of Common Stock
      • The Market for Common Stock
      • Box: A Wild Initial Day of Trading
      • Common Stock Valuation
      • Valuing the Entire Corporation
      • Stock Market Equilibrium
      • Box: Run-Ups before Deals: Chicanery or Coincidence?
      • Actual Stock Prices and Returns
      • Box: Investing in Emerging Markets
      • Preferred Stock
      • Summary
  • Part IV: Strategic Investment Decisions
    1. The Cost of Capital
      • The Weighted Average Cost of Capital
      • Cost of Debt, kd(1 - T)
      • Cost of Preferred Stock, kps
      • Cost of Common Stock, ks
      • Composite, or Weighted Average, Cost of Capital, WACC
      • Factors That Affect the Weighted Average Cost of Capital
      • Box: WACC Estimates for Some Large U.S. Corporations
      • Box: Global Variations in the Cost of Capital
      • Adjusting the Cost of Capital for Risk
      • Estimating Project Risk
      • Using the CAPM to Estimate a Project's Risk-Adjusted Cost of Capital
      • Techniques for Measuring Beta Risk
      • The Cost of Depreciation and Other Types of Internally Generated Funds
      • Box: The Cost of Equity Capital for Small Firms
      • Some Problem Areas in Cost of Capital
      • Four Mistakes to Avoid
      • Summary
      • Extensions
    2. The Basics of Capital Budgeting
      • Importance of Capital Budgeting
      • Generating Ideas for Capital Projects
      • Project Classifications
      • Similarities between Capital Budgeting and Security Valuation
      • Capital Budgeting Decision Rules
      • Comparison of the NPV and IRR Methods
      • Modified Internal Rate of Return (MIRR)
      • Profitability Index
      • Conclusion on Capital Budgeting Methods
      • Business Practices
      • The Post-Audit
      • Box: Capital Budgeting in the Small Firm
      • Using Capital Budgeting Techniques in Other Contexts
      • Summary
    3. Cash Flow Estimation and Other Topics in Capital Budgeting
      • Estimating Cash Flows
      • Identifying the Relevant Cash Flows
      • Tax Effects
      • Evaluating Capital Budgeting Projects
      • Example of Cash Flow Analysis: Expansion Project
      • Box: GE Bets on Europe
      • Example of Cash Flow Analysis: Replacement Project
      • Cash Flow Estimation Bias
      • Option Value
      • Comparing Projects with Unequal Lives
      • Abandonment Value
      • Adjusting for Inflation
      • Summary
    4. Risk Analysis and Real Options
      • Introduction to Project Risk Analysis
      • Techniques for Measuring Stand-Alone Risk
      • Box: Coca-Cola Takes on the High-Risk, High-Return Markets of Asia
      • Should Firms Diversify to Reduce Corporate Risk?
      • Market Risk and Divisional Betas
      • Box: High-Tech CFOs
      • Our View of Project Risk Analysis
      • Risky Cash Outflows
      • Introduction to Real Options
      • Identifying Optimal Responses to Changing Conditions: Decision Trees
      • Determining the Value of Real Options
      • Real Options and Financial Management
      • The Optimal Capital Budget
      • Establishing the Optimal Capital Budget in Practice
      • Summary
      • Extensions
  • Part V: Strategic Financing Decisions
    1. Long-Term Financial Planning
      • Strategic Plans
      • Operating Plans
      • The Financial Plan
      • Sales Forecasts
      • Financial Statement Forecasting: The Percent of Sales Method
      • The AFN Formula
      • Forecasting Financial Requirements When the Balance Sheet Ratios Are Subject to Change
      • Other Techniques for Forecasting Financial Statements
      • Computerized Financial Planning Models
      • Summary
    2. Capital Structure Decisions: The Basics
      • Business and Financial Risk
      • Capital Structure Theory
      • Setting the Target Capital Structure When Cash Flows Are Perpetuities
      • Some Considerations in the Capital Structure Decisions
      • An Approach to Setting the Target Capital Structure
      • Some Additional Insights into Capital Structure Decisions
      • Summary
    3. Capital Structure Decisions: Extensions
      • Capital Structure Theory: Modigliani-Miller Models
      • The Hamada Model: Introducing Market Risk
      • Capital Structure Theory: The Miller Model
      • Criticism of the MM and Miller Models
      • Capital Structure Theory: The Trade-Off Models
      • Capital Structure Theory: The Signaling Model
      • Capital Structure Theory: Our View
      • Variations in Capital Structures
      • Book Weights versus Market Weights
      • Summary
    4. Distributions to Shareholders: Dividends and Repurchases
      • Dividends versus Capital Gains: What Do Investors Prefer?
      • Other Dividend Policy Issues
      • Dividend Stability
      • Establishing the Dividend Policy in Practice
      • Changing Dividend Policies
      • Dividend Reinvestment Plans
      • Summary of Factors Influencing Dividend Policy
      • Overview of the Dividend Policy Decision
      • Stock Dividends and Stock Splits
      • Stock Repurchases
      • Box: Stock Repurchases: An Easy Way to Boost Stock Prices?
      • Box: Share Repurchases Are Less Common Overseas
      • Summary
  • Part VI: Tactical Financing Decisions
    1. Issuing Securities, Refunding Operations, and Other Topics
      • The Decision to Go Public
      • The Decision to List
      • Procedures for Selling New Common Stock
      • Advantages and Disadvantages of Financing with Common Stock
      • Securities Regulations and the Investment Banking Process
      • Recent Innovations in Types of Bonds
      • Advantages and Disadvantages of Long-Term Debt
      • Factors That Influence Long-Term Financing Decisions
      • Refunding Operations
      • Summary
    2. Lease Financing
      • The Two Parties to Leasing
      • Types of Leases
      • Tax Effects
      • Financial Statement Effects
      • Evaluation by the Lessee
      • Evaluation by the Lessor
      • Other Issues in Lease Analysis
      • Other Reasons for Leasing
      • Summary
      • Extensions
    3. Hybrid Financing: Preferred Stock, Warrants, and Convertibles
      • Preferred Stock
      • Warrants
      • Convertibles
      • A Final Comparison of Warrants and Convertibles
      • Other Topics in Hybrid Financing
      • Summary
      • Extensions
  • Part VII: Working Capital Management
    1. Current Asset Management
      • Working Capital Terminology
      • Alternative Current Asset Investment Policies
      • Box: EVA and Working Capital
      • The Concept of Zero Working Capital
      • Cash Management
      • Box: American Standard Embraces Demand Flow Management
      • The Cash Budget
      • Cash Management Techniques
      • Marketable Securities
      • Inventory
      • Inventory Costs
      • Inventory Control Systems
      • Box: Keeping Inventory Lean
      • Receivables Management
      • Credit Policy
      • Setting the Credit Period and Standards
      • Setting the Collection Policy
      • Cash Discounts
      • Other Factors Influencing Credit Policy
      • Summary
    2. Short-Term Financing
      • Alternative Current Asset Financing Policies
      • Advantages and Disadvantages of Short-Term Financing
      • Sources of Short-Term Financing
      • Accruals
      • Accounts Payable (Trade Credit)
      • Short-Term Bank Loans
      • The Cost of Bank Loans
      • Box: The Travails of Jamesway
      • Choosing a Bank
      • Commercial Papers
      • Use of Securities in Short-Term Financing
      • Summary
    3. Working Capital Management: Extensions
      • The Cash Conversion Cycle
      • Setting the Target Cash Balance
      • Accounting for Inventory
      • The Economic Ordering Quantity (EOQ) Model
      • EOQ Model Extensions
      • The Payments Pattern Approach to Monitoring Receivables
      • Analyzing Proposed Changes in Credit Policy
      • Summary
  • Part VIII: Special Topics
    1. Derivatives and Risk Management
      • Reasons to Manage Risk
      • Background on Derivatives
      • Box: Orange County Blues
      • Options
      • Introduction to Option Pricing Models
      • The Black-Scholes Option Pricing Model (OPM)
      • Other Types of Derivatives
      • Risk Management
      • Fundamentals of Risk Management
      • Box: Microsoft's Goal: Manage Every Risk!
      • Box: Baring and Sumitomo Suffer Large Losses in the Derivative Marfket
      • Using Derivatives to Reduce Risks
      • Summary
      • Extensions
    2. Bankruptcy, Reorganization, and Liquidation
      • Financial Distress and Its Consequences
      • Issues Facing a Firm in Financial Distress
      • Settlements without Going through Formal Bankruptcy
      • Federal Bankruptcy Law
      • Reorganization in Bankruptcy
      • Liquidation in Bankruptcy
      • Other Motivations for Bankruptcy
      • Some Criticisms of Bankruptcy Laws
      • Other Topics in Bankruptcy
      • Summary
      • Extensions
    3. Mergers, LBOs, Divestures, and Holding Companies
      • Rationale for Mergers
      • Types of Mergers
      • Level of Merger Activity
      • Hostile versus Friendly Takeovers
      • Merger Regulation
      • Merger Analysis
      • Box: When You Merge You Combine More Than Just Financial Statements
      • Structuring the Takeover Bid
      • Accounting Treatment for Mergers
      • Analysis for a "True Consolidation"
      • The Role of Investment Bankers
      • Who Wins: The Empirical Evidence
      • Corporate Alliances
      • Leveraged Buyouts
      • Divestitures
      • Box: Governments Are Divesting State-Owned Businesses to Spur Economic Efficiency
      • Holding Companies
      • Box: Merging as a Means of Exiting a Closely Held Business
      • Summary
    4. Multinational Financial Management
      • Multination, or Global, Corporations
      • Multinational versus Domestic Financial Management
      • Exchange Rates
      • The International Monetary
      • System
      • Trading in Foreign Exchange
      • Interest Rate Parity
      • Purchasing Power Parity
      • Box: Hungry for a Big Mac? Go to China!
      • Inflation, Interest Rates, and Exchange Rates
      • International Money and Capital Markets
      • Multinational Capital Budgeting
      • International Capital Structures
      • Multinational Working Capital Management
      • Summary
    5. Pension Plan Management
      • The Role and Scope of Pension Plan Management
      • Three Types of Pension Plans
      • Key Terms and Concepts
      • Pension Fund Mathematics: Defined Benefit Plans
      • Risk Inherent in Pension Plans
      • Illustrations of a Defined Benefit versus a Defined Contribution Plan
      • Defined Benefit versus Defined Contribution Plan: The Employee Choice
      • Developing a Plan Strategy
      • Pension Fund Investment Performance
      • "Tapping" Pension Fund Assets
      • Retiree Health Benefits
      • Summary
  • Appendixes
    • Appendix A: Mathematical Tables
    • Solutions to Self-Test Problems
    • Answers to End-of-Chapter Problems
    • Selected Equations and Data


Financial Management

Reviewed by Roland Buresund

Good ******* (7 out of 10)

Last modified: June 15, 2011, 4:31 p.m.

Good reference. Recommended.


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