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• Title Page
• The Pearson Series in Finance
• Dedication
• Copyright
• About The Author
• Brief Contents
• Contents
• Preface
• Solving Teaching And Learning Challenges
• Mylab Finance
• Developing Employability Skills
• Table Of Contents Overview
• Instructor Teaching Resources
• Reviewers
• Acknowledgments
• Part 1: Fundamental Concepts and Basic Tools of Finance
• Chapter 1. Financial Management
• 1.1 The Cycle of Money
• 1.2 Overview of Finance Areas
• 1.3 Financial Markets
• 1.4 The Finance Manager and Financial Management
• 1.5 Objective of the Finance Manager
• Profit Maximization
• 1.6 Internal and External Players
• 1.7 The Legal Forms of Business
• Sole Proprietorship
• Partnership
• Corporations
• Hybrid Corporations
• Not-for-Profit Corporations
• 1.8 The Financial Management Setting: The Agency Model
• 1.9 Corporate Governance and Business Ethics
• Finance Follies The Financial Meltdown of 2008
• 1.10 Why Study Finance?
• Employability
• Putting Finance To Work Now Hiring
• Key Terms
• Questions
• Prepping for Exams
• Mini-Case Richardses’ Tree Farm Grows Up
• Chapter 2. Financial Statements
• 2.1 Financial Statements
• The Balance Sheet
• The Income Statement
• Statement of Retained Earnings
• 2.2 Cash Flow Identity and the Statement of Cash Flows
• The First Component: Cash Flow from Assets
• The Second Component: Cash Flow to Creditors
• The Third Component: Cash Flow to Owners
• Putting It All Together: The Cash Flow Identity
• The Statement of Cash Flows
• Free Cash Flow
• 2.3 Financial Performance Reporting
• Regulation Fair Disclosure
• Notes to the Financial Statements
• 2.4 Financial Statements on the Internet
• Putting Finance To Work Look Before You Leap
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Hudson Valley Realty
• Chapter 3. The Time Value of Money (Part 1)
• 3.1 Future Value and Compounding Interest
• The Single-Period Scenario
• The Multiple-Period Scenario
• Methods of Solving Future Value Problems
• 3.2 Present Value and Discounting
• The Single-Period Scenario
• The Multiple-Period Scenario
• The Use of Time Lines
• 3.3 One Equation and Four Variables
• 3.4 Applications of the Time Value of Money Equation
• Putting Finance To Work Sports Agent
• 3.5 Doubling of Money: The Rule of 72
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Richardses’ Tree Farm, Inc.: The Continuing Saga
• Chapter 4. The Time Value of Money (Part 2)
• 4.1 Future Value of Multiple Payment Streams
• 4.2 Future Value of an Annuity Stream
• Future Value of an Annuity: An Application
• 4.3 Present Value of an Annuity
• 4.4 Annuity Due and Perpetuity
• Putting Finance To Work Modeling the Future with Actuarial Science
• Perpetuity
• 4.5 Three Loan Payment Methods
• Interest and Principal at Maturity of Loan (Discount Loan)
• Interest as You Go, Principal at Maturity of Loan (Interest-Only Loan)
• Interest and Principal as You Go (Amortized Loan)
• 4.6 Amortization Schedules
• 4.7 Waiting Time and Interest Rates for Annuities
• 4.8 Solving a Lottery Problem
• 4.9 Ten Important Points about the TVM Equation
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Fitchminster Injection Molding, Inc.: Rose Climbs High
• Chapter 5. Interest Rates
• 5.1 How Financial Institutions Quote Interest Rates: Annual and Periodic Interest Rates
• 5.2 Effect of Compounding Periods on the Time Value of Money Equations
• 5.3 Consumer Loans and Amortization Schedules
• 5.4 Nominal and Real Interest Rates
• 5.5 Risk-Free Rate and Premiums
• Maturity Premiums
• 5.6 Yield Curves
• 5.7 A Brief History of Interest Rates and Inflation in the United States
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Sweetening the Deal: Povero Construction Company
• Part 2: Valuing Stocks and Bonds and Understanding Risk and Return
• Chapter 6. Bonds and Bond Valuation
• 6.1 Application of the Time Value of Money Tool: Bond Pricing
• Key Components of a Bond
• Pricing a Bond in Steps
• 6.2 Semiannual Bonds and Zero-Coupon Bonds
• Pricing Bonds after Original Issue
• Zero-Coupon Bonds
• Amortization of a Zero-Coupon Bond
• 6.3 Yields and Coupon Rates
• The First Interest Rate: Yield to Maturity
• The “Other” Interest Rate: Coupon Rate
• Relationship of Yield to Maturity and Coupon Rate
• 6.4 Bond Ratings
• 6.5 Some Bond History and More Bond Features
• 6.6 U.S. Government Bonds
• Pricing a U.S. Government Note or Bond
• Putting Finance To Work Municipal Manager
• Pricing a Treasury Bill
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Bay Path Cranberry Products
• Chapter 7. Stocks and Stock Valuation
• 7.1 Characteristics of Common Stock
• Ownership
• Claim on Assets and Cash Flow (Residual Claim)
• Vote (Voice in Management)
• No Maturity Date
• Dividends and Their Tax Effect
• Authorized, Issued, and Outstanding Shares
• Treasury Stock
• Preemptive Rights
• 7.2 Stock Markets
• Primary Markets
• Secondary Markets: How Stocks Trade
• Bull Markets and Bear Markets
• 7.3 Stock Valuation
• The Constant Dividend Model with an Infinite Horizon
• The Constant Dividend Model with a Finite Horizon
• The Constant Growth Dividend Model with an Infinite Horizon
• The Constant Growth Dividend Model with a Finite Horizon
• Nonconstant Growth Dividends
• Finance Follies Irrational Expectations: Bulbs and Bubbles
• 7.4 Dividend Model Shortcomings
• 7.5 Preferred Stock
• 7.6 Efficient Markets
• Operational Efficiency
• Informational Efficiency
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Lawrence’s Legacy: Part 1
• Chapter 8. Risk and Return
• 8.1 Returns
• Dollar Profits and Percentage Returns
• Converting Holding Period Returns to Annual Returns
• Extrapolating Holding Period Returns
• 8.2 Risk (Certainty and Uncertainty)
• Finance Follies “Dangerous to Your Wealth”: Is Investing Just Gambling?
• 8.3 Historical Returns
• 8.4 Standard Deviation as a Measure of Risk
• Normal Distributions
• 8.5 Returns in an Uncertain World (Expectations and Probabilities)
• Finance Follies “Scam of the Century”: Bernie Madoff and the $50 Billion Fraud
• Determining the Probabilities of All Potential Outcomes
• 8.6 The Risk-and-Return Trade-Off
• Investment Rules
• 8.7 Diversification: Minimizing Risk or Uncertainty
• When Diversification Works
• Adding More Stocks to the Portfolio: Systematic and Unsystematic Risk
• 8.8 Beta: The Measure of Risk in a Well-Diversified Portfolio
• 8.9 The Capital Asset Pricing Model and the Security Market Line
• The Capital Asset Pricing Model
• Application of the SML
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Lawrence’s Legacy: Part 2
• Part 3: Capital Budgeting
• Chapter 9. Capital Budgeting Decision Models
• 9.1 Short-Term and Long-Term Decisions
• 9.2 Payback Period and Discounted Payback Period
• Payback Period
• Finance Follies IBM Exits the Consumer Software Market: Misreading Future Cash Flows
• Discounted Payback Period
• 9.3 Net Present Value
• Mutually Exclusive versus Independent Projects
• Unequal Lives of Projects
• Net Present Value Example: Equation and Calculator Function
• 9.4 Internal Rate of Return and Modified Internal Rate of Return
• Internal Rate of Return
• Putting Finance To Work Marketing and Sales: Your Product = Your Customer’s Capital Budgeting Deci
• Modified Internal Rate of Return
• 9.5 Profitability Index
• 9.6 Overview of Six Decision Models
• Capital Budgeting Using a Spreadsheet
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case BioCom, Inc.: Part 1
• Chapter 10. Cash Flow Estimation
• 10.1 The Importance of Cash Flow
• 10.2 Estimating Cash Flow for Projects: Incremental Cash Flow
• Sunk Costs
• Opportunity Costs
• Erosion Costs
• Synergy Gains
• Working Capital
• Finance Follies Boston’s “Big Dig” Gets Dug Under
• 10.3 Capital Spending and Depreciation
• Straight-Line Depreciation
• Modified Accelerated Cost Recovery System
• 10.4 Cash Flow and the Disposal of Capital Equipment
• 10.5 Projected Cash Flow for a New Product
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case BioCom, Inc.: Part 2, Evaluating a New Product Line
• Chapter 11. The Cost of Capital
• 11.1 The Cost of Capital: A Starting Point
• 11.2 Components of the Weighted Average Cost of Capital
• Debt Component
• Preferred Stock Component
• Equity Component
• Retained Earnings
• The Debt Component and Taxes
• 11.3 Weighting the Components: Book Value or Market Value?
• Book Value
• Adjusted Weighted Average Cost of Capital
• Market Value
• 11.4 Using the Weighted Average Cost of Capital in a Budgeting Decision
• The Weighted Average Cost of Capital for Individual Projects
• 11.5 Selecting Appropriate Betas for Projects
• 11.6 Constraints on Borrowing and Selecting Projects for the Portfolio
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case BioCom, Inc.: Part 3, A Fresh Look at the WACC
• Part 4: Financial Planning and Evaluating Performance
• Chapter 12. Forecasting and Short-Term Financial Planning
• 12.1 Sources and Uses of Cash
• 12.2 Cash Budgeting and the Sales Forecast
• Cash Inflow from Sales
• Other Cash Receipts
• 12.3 Cash Outflow from Production
• 12.4 The Cash Forecast: Short-Term Deficits and Short-Term Surpluses
• Funding Cash Deficits
• Investing Cash Surpluses
• 12.5 Planning with Pro Forma Financial Statements
• Pro Forma Income Statement
• Pro Forma Balance Sheet
• Putting Finance To Work Information Technology
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Midwest Properties: Quarterly Forecasting
• Chapter 13. Working Capital Management
• 13.1 The Cash Conversion Cycle
• Average Production Cycle
• Average Collection Cycle
• Average Payment Cycle
• Putting It All Together: The Cash Conversion Cycle
• 13.2 Managing Accounts Receivable and Setting Credit Policy
• Collecting Accounts Receivable
• Credit: A Two-Sided Coin
• Qualifying for Credit
• Setting Payment Policy
• Collecting Overdue Debt
• 13.3 The Float
• Speeding Up the Collection Float (Shortening the Lag Time)
• Extending the Disbursement Float (Lengthening the Lag Time)
• 13.4 Inventory Management: Carrying Costs and Ordering Costs
• ABC Inventory Management
• Redundant Inventory Items
• Economic Order Quantity
• Just in Time
• 13.5 The Effect of Working Capital on Capital Budgeting
• Putting Finance To Work Operations Management
• Inventories and Daily Operations
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Cranston Dispensers, Inc.: Part 1
• Chapter 14. Financial Ratios and Firm Performance
• 14.1 Financial Statements
• Benchmarking
• 14.2 Financial Ratios
• Short-Term Solvency: Liquidity Ratios
• Long-Term Solvency: Financial Leverage Ratios
• Asset Management Ratios
• Profitability Ratios
• Market Value Ratios
• DuPont Analysis
• 14.3 External Uses of Financial Statements and Industry Averages
• Cola Wars
• Industry Ratios
• Finance Follies Cooking the Books at Enron and WorldCom
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Cranston Dispensers, Inc.: Part 2
• Part 5: Other Selected Finance Topics
• Chapter 15. Raising Capital
• 15.1 The Business Life Cycle
• 15.2 Borrowing for a Start-Up and a Growing Business
• Personal Funds and Family Loans
• Commercial Bank Loans
• Commercial Bank Loans through the Small Business Administration
• Angel Financing and Venture Capital
• 15.3 Borrowing for a Stable and Mature Business: Taking Out Bank Loans
• Straight Loans
• Discount Loans
• Letters of Credit or Lines of Credit
• Compensating Balance Loans
• 15.4 Borrowing for a Stable and Mature Business: Selling Bonds
• 15.5 Borrowing for a Stable and Mature Business: Selling Stock
• Initial Public Offerings and Underwriting
• Registration, Prospectus, and Tombstone
• The Marketing Process: Road Show
• The Auction
• The Aftermarket: Dealer in the Shares
• Putting Finance To Work Corporate Law
• 15.6 Other Borrowing Options for a Mature Business
• 15.7 The Final Phase: Closing the Business
• Straight Liquidation: Chapter 7
• Reorganization: Chapter 11
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case AK Web Developers.com
• Chapter 16. Capital Structure
• 16.1 Capital Markets: A Quick Review
• 16.2 Benefits of Debt
• Earnings per Share as a Measure of the Benefits of Borrowing
• 16.3 Break-Even Earnings for Different Capital Structures
• 16.4 Pecking Order
• Firms Prefer Internal Financing First
• Firms Choose to Issue the Cheapest Security First and Use Equity as a Last Resort
• 16.5 Modigliani and Miller on Optimal Capital Structure
• Capital Structure in a World of No Taxes and No Bankruptcy
• Capital Structure in a World of Corporate Taxes and No Bankruptcy
• Debt and the Tax Shield
• 16.6 The Static Theory of Capital Structure
• Bankruptcy
• Optimal Capital Structure
• Finance Follies Hedge Funds: Some Really Smart Guys Get into Big Trouble
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case General Energy Storage Systems: How Much Debt and How Much Equity?
• Chapter 17. Dividends, Dividend Policy, and Stock Splits
• 17.1 Cash Dividends
• Buying and Selling Stock
• Declaring and Paying a Cash Dividend: A Chronology
• Different Types of Dividends
• 17.2 Dividend Policy
• Dividend Clienteles
• Dividend Policy Irrelevance
• Reasons Favoring a Low- or No-Dividend-Payout Policy
• Reasons Favoring a High-Dividend-Payout Policy
• Optimal Dividend Policy
• 17.3 Selecting a Dividend Policy
• Some Further Considerations in the Selection of a Dividend Policy
• 17.4 Stock Dividends, Stock Splits, and Reverse Splits
• Reasons for Stock Splits
• Reverse Splits
• 17.5 Specialized Dividend Plans
• Stock Repurchase
• Dividend Reinvestment Plans
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case East Coast Warehouse Club
• Chapter 18. International Financial Management
• 18.1 Managing Multinational Operations
• Cultural Risk
• Business Risk
• Political Risk
• Finance Follies Rino International
• 18.2 Foreign Exchange
• Purchasing Power Parity
• Currency Exchange Rates
• Cross Rates
• Arbitrage Opportunities
• Forward Rates
• Using Forward Rates
• Changing Spot Rates
• 18.3 Transaction, Operating, and Translation Exposures
• Transaction Exposure
• Operating Exposure
• Translation Exposure
• 18.4 Foreign Investment Decisions
• Key Terms
• Questions
• Prepping for Exams
• Problems
• Advanced Problems for Spreadsheet Application
• Mini-Case Scholastic Travel Services, Inc.
• Appendix 1. Future Value Interest Factors
• Appendix 2. Present Value Interest Factors
• Appendix 3. Future Value Interest Factors of an Annuity
• Appendix 4. Present Value Interest Factors of an Annuity
• Appendix 5. Answers to Prepping for Exam Questions
• Glossary
• Index