CORPORATE FINANCE FUNDAMENTALS

Brief Contents PART 1 INTRODUCTION 1 The Financial Manager and the Firm 1 PART 2 FOUNDATIONS 2 The Financial System and the Level of Interest Rates 27 3 Financial Statements, Cash Flows, and Taxes 48 4 Analyzing Financial Statements 81 PART 3 VALUATION OF FUTURE CASH FLOWS AND RISK 5 The Time Value of Money 124 6 Discounted Cash Flows and Valuation 159 7 Risk and Return 200 8 Bond Valuation and the Structure of Interest Rates 238 9 Stock Valuation 270 PART 4 CAPITAL BUDGETING DECISIONS 10 The Fundamentals of Capital Budgeting 301 11 Cash Flows and Capital Budgeting 341 12 Evaluating Project Economics and Capital Rationing 380 13 The Cost of Capital 409 PART 5 WORKING CAPITAL MANAGEMENT AND FINANCING DECISIONS 14 Working Capital Management 441 15 How Firms Raise Capital 472 16 Capital Structure Policy 504 17 Dividends, Stock Repurchases, and Payout Policy 561 PART 6 BUSINESS FORMATION, VALUATION, AND FINANCIAL PLANNING 18 Business Formation, Growth, and Valuation 569 19 Financial Planning and Forecasting 606 PART 7 OPTIONS IN CORPORATE FINANCE AND INTERNATIONAL DECISIONS 20 Options and Corporate Finance 641 21 International Financial Management 671 xxiv indd Page xxiv 8/5/11 2:09:55 PM user-f396 user-f396 LibraryPirate Contents CHAPTER 1 The Financial Manager and the Firm 1 1.1 THE ROLE OF THE FINANCIAL MANAGER 2 Stakeholders 2 It’s All about Cash Flows 2 Building Intuition: Cash Flows Matter Most to Investors 4 Three Fundamental Decisions in Financial Management 4 Building Intuition: Sound Investments are Those Where the Value of the Benefits Exceeds Their Cost 5 Building Intuition: Financing Decisions Affect the Value of the Firm 5 1.2 FORMS OF BUSINESS ORGANIZATION 6 Sole Proprietorships 6 Partnerships 7 Corporations 7 Hybrid Forms of Business Organization 8 1.3 MANAGING THE FINANCIAL FUNCTION 9 Organizational Structure 9 Positions Reporting to the CFO 10 External Auditors 10 The Audit Committee 10 The Compliance and Ethics Director 10 1.4 THE GOAL OF THE FIRM 11 What Should Management Maximize? 11 Why Not Maximize Profits? 11 Building Intuition: The Timing of Cash Flows Affects Their Value 11 Building Intuition: The Riskiness of Cash Flows Affects Their Value 12 Maximize the Value of the Firm’s Stock 12 Building Intuition: The Financial Manager’s Goal Is to Maximize the Value of the Firm’s Stock 12 Can Management Decisions Affect Stock Prices? 12 1.5 AGENCY CONFLICTS: SEPARATION OF OWNERSHIP AND CONTROL 13 Ownership and Control 14 Agency Relationships 14 Do Managers Really Want to Maximize Stock Price? 14 Aligning the Interests of Management and Stockholders 14 Sarbanes-Oxley and Other Regulatory Reforms 16 1.6 THE IMPORTANCE OF ETHICS IN BUSINESS 18 Business Ethics 18 Are Business Ethics Different from Everyday Ethics? 18 Types of Ethical Conflicts in Business 19 The Importance of an Ethical Business Culture 20 Serious Consequences 20 Summary of Learning Objectives • Self-Study Problems • Solutions to Self-Study Problems • Critical Thinking Questions • Questions and Problems • Sample Test Problems