FUNDAMENTALS
OF
FINANCIAL
MANAGING
4th Edition
FRANK M. WERNER JAMES A.F. STONER
Fordham University Fordham University
Associate Professor of Finance Professor of Management Systems
,Acquisitions Editor: Edgar Laube
Text Design and Editing: Philip Schrömbgens
File Management, Editing, and Production: Kyle Houghton, Phungporn Jaroonjetjamnong,
John Fernandez, Elizabeth Tam, Shui Hwang,
Cara Jacaruso
Cover Design: Frank Werner
For permission to use copyrighted material, grateful acknowledgement is made to the copyright
holders on page xxiv which are hereby made part of this copyright page.
Fundamentals of Financial Managing, 4th Edition
Copyright © 2002, 2006, 2007, 2008, 2012, 2016 by Frank M. Werner and James A.F. Stoner
All rights reserved. Printed in the United States of America. No part of this book may be used or
reproduced in any manner whatsoever without written permission, except in the case of brief
quotations embodied in critical articles and reviews. For information, contact:
Textbook Media Press
670 Cleveland Avenue South
St. Paul, MN 55116.
Library of Congress Cataloging-in-Publication Data
Werner, Frank M., 1944-
Fundamentals of Financial Managing, 4th Edition / Frank M. Werner,
James A.F. Stoner.
p. cm.
Includes bibliographical references and index.
ISBN 1-930789-43-2
, To my parents, Anne and Jules Werner,
who opened my eyes to the joys of learning.
FMW
To Barbara, Alexandra, and Carolyn, who continue
to do a wonderful job of “saving Jim from himself.”
JAFS
, B R I E F C O N T E N T S
To the Instructor x
To the Student xx
About the Authors xxiii
Credits xxiv
PART I ABOUT FINANCE AND MONEY 1
1 What is Financial Managing? 2
2 Data for Financial Decision Making 28
3 The Time Value of Money 56
4 Money Rates 84
PART II RAISING MONEY 111
5 Financial Planning 112
6 Financial Instruments 136
7 Financial Markets and Institutions 166
PART III RISK VS. RETURN 189
8 Risk and its Measurement 190
9 The Value of Securities 218
10 The Cost of Capital 238
PART IV ADDING VALUE 261
11 Capital Budgeting 262
12 Investing in Permanent Working Capital Assets 286
13 Improving Financial Processes 310
14 Selecting the Best Debt-Equity Mix 334
15 Managing Risk 360
PART V RETURNING VALUE TO SHAREHOLDERS 383
16 Dividend Policy 384
17 Increasing Share Price 406
PART VI LOOKING AHEAD 429
18 The Future: Yours and Finance’s 430
Summary of Mathematical Relationships M–1
Summary of Financial Ratios R–1
Using Your Financial Calculator C–1
Spreadsheet Functions S–1
Time Value Tables T–1
Glossary G–1
Index I–1
OF
FINANCIAL
MANAGING
4th Edition
FRANK M. WERNER JAMES A.F. STONER
Fordham University Fordham University
Associate Professor of Finance Professor of Management Systems
,Acquisitions Editor: Edgar Laube
Text Design and Editing: Philip Schrömbgens
File Management, Editing, and Production: Kyle Houghton, Phungporn Jaroonjetjamnong,
John Fernandez, Elizabeth Tam, Shui Hwang,
Cara Jacaruso
Cover Design: Frank Werner
For permission to use copyrighted material, grateful acknowledgement is made to the copyright
holders on page xxiv which are hereby made part of this copyright page.
Fundamentals of Financial Managing, 4th Edition
Copyright © 2002, 2006, 2007, 2008, 2012, 2016 by Frank M. Werner and James A.F. Stoner
All rights reserved. Printed in the United States of America. No part of this book may be used or
reproduced in any manner whatsoever without written permission, except in the case of brief
quotations embodied in critical articles and reviews. For information, contact:
Textbook Media Press
670 Cleveland Avenue South
St. Paul, MN 55116.
Library of Congress Cataloging-in-Publication Data
Werner, Frank M., 1944-
Fundamentals of Financial Managing, 4th Edition / Frank M. Werner,
James A.F. Stoner.
p. cm.
Includes bibliographical references and index.
ISBN 1-930789-43-2
, To my parents, Anne and Jules Werner,
who opened my eyes to the joys of learning.
FMW
To Barbara, Alexandra, and Carolyn, who continue
to do a wonderful job of “saving Jim from himself.”
JAFS
, B R I E F C O N T E N T S
To the Instructor x
To the Student xx
About the Authors xxiii
Credits xxiv
PART I ABOUT FINANCE AND MONEY 1
1 What is Financial Managing? 2
2 Data for Financial Decision Making 28
3 The Time Value of Money 56
4 Money Rates 84
PART II RAISING MONEY 111
5 Financial Planning 112
6 Financial Instruments 136
7 Financial Markets and Institutions 166
PART III RISK VS. RETURN 189
8 Risk and its Measurement 190
9 The Value of Securities 218
10 The Cost of Capital 238
PART IV ADDING VALUE 261
11 Capital Budgeting 262
12 Investing in Permanent Working Capital Assets 286
13 Improving Financial Processes 310
14 Selecting the Best Debt-Equity Mix 334
15 Managing Risk 360
PART V RETURNING VALUE TO SHAREHOLDERS 383
16 Dividend Policy 384
17 Increasing Share Price 406
PART VI LOOKING AHEAD 429
18 The Future: Yours and Finance’s 430
Summary of Mathematical Relationships M–1
Summary of Financial Ratios R–1
Using Your Financial Calculator C–1
Spreadsheet Functions S–1
Time Value Tables T–1
Glossary G–1
Index I–1
