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• Half Title
• The Pearson Series in Finance
• Title Page
• Copyright
• Dedication
• Brief Contents
• Contents
• Preface
• Part 1: Introduction to Financial Management
• Chapter 1: Getting Started—Principles of Finance
• Principle 1: Money Has a Time Value
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 3: Cash Flows Are the Source of Value
• Principle 4: Market Prices Reflect Information
• Principle 5: Individuals Respond to Incentives
• 1.1 Finance: An Overview
• What Is Finance
• Why Study Finance
• 1.2 Types of Business Organizations
• Sole Proprietorship
• Partnership
• Corporation
• Not for Profit Organization
• Co-operative
• How Does Finance Fit into the Firm’s Organizational Structure
• 1.3 The Goal of the Financial Manager
• Maximizing Shareholder Wealth
• Ethical Considerations in Corporate Finance
• Regulation Aimed at Making the Goal of the Firm Work: The Sarbanes-Oxley Act
• 1.4 The Five Basic Principles of Finance
• Principle 1: Money Has a Time Value
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 3: Cash Flows Are the Source of Value
• Principle 4: Market Prices Reflect Information
• Principle 5: Individuals Respond to Incentives
• Chapter Summaries
• Study Questions
• Chapter 2: Firms and the Financial Markets
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 4: Market Prices Reflect Information
• Principle 5: Individuals Respond to Incentives
• 2.1 The Basic Structure of Financial Markets
• 2.2 The Financial Marketplace: Financial Institutions
• Commercial Banks: Everyone’s Financial Marketplace
• Nonbank Financial Intermediaries
• Finance for Life: Planning for Retirement
• 2.3 The Financial Marketplace: Securities Markets
• How Securities Markets Bring Corporations and Investors Together
• Types of Securities
• Finance in a Flat World: Where’s the Money Around the World
• Chapter Summaries
• Study Questions
• Chapter 3: Understanding Financial Statements
• Principle 1: Money Has a Time Value
• Principle 3: Cash Flows Are the Source of Value
• Principle 4: Market Prices Reflect Information
• Principle 5: Individuals Respond to Incentives
• 3.1 An Overview of the Firm’s Financial Statements
• Basic Financial Statements
• Why Study Financial Statements
• What Are the Accounting Principles Used to Prepare Financial Statements
• 3.2 The Income Statement
• Income Statement of H. J. Boswell, Inc
• Connecting the Income Statement and Balance Sheet
• Interpreting Firm Profitability Using the Income Statement
• GAAP and Earnings Management
• 3.3 Corporate Taxes
• Computing Taxable Income
• Federal Income Tax Rates for Corporate Income
• Marginal and Average Tax Rates
• Dividend Exclusion for Corporate Stockholders
• 3.4 The Balance Sheet
• The Balance Sheet of H. J. Boswell, Inc
• Firm Liquidity and Net Working Capital
• Debt and Equity Financing
• Book Values, Historical Costs, and Market Values
• Finance for Life: Preparing a Balance Sheet and an Income Statement for a Business
• 3.5 The Cash Flow Statement
• Sources and Uses of Cash
• H. J. Boswell’s Cash Flow Statement
• Finance in a Flat World: GAAP vs. IFRS
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Chapter 4: Financial Analysis—Sizing Up Firm Performance
• Principle 3: Cash Flows Are the Source of Value
• Principle 4: Market Prices Reflect Information
• Principle 5: Individuals Respond to Incentives
• 4.1 Why Do We Analyze Financial Statements
• 4.2 Common-Size Statements: Standardizing Financial Information
• The Common-Size Income Statement: H. J. Boswell, Inc
• The Common-Size Balance Sheet: H. J. Boswell, Inc
• 4.3 Using Financial Ratios
• Liquidity Ratios
• Capital Structure Ratios
• Asset Management Efficiency Ratios
• Profitability Ratios
• Market Value Ratios
• Finance for Life: Making That Big Purchase
• Finance in a Flat World: Ratios and International Accounting Standards
• Summing Up the Financial Analysis of H. J. Boswell, Inc
• 4.4 Selecting a Performance Benchmark
• Trend Analysis
• Peer-Firm Comparisons
• 4.5 Limitations of Ratio Analysis
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Part 2: Valuation of Financial Assets
• Chapter 5: The Time Value of Money—The Basics
• Principle 1: Money Has a Time Value
• 5.1 Using Timelines to Visualize Cash Flows
• 5.2 Compounding and Future Value
• Compound Interest and Time
• Compound Interest and the Interest Rate
• Techniques for Moving Money Through Time
• Applying Compounding to Things Other Than Money
• Compound Interest with Shorter Compounding Periods
• Finance for Life: Getting on the Property Ladder
• 5.3 Discounting and Present Value
• The Mechanics of Discounting Future Cash Flows
• Two Additional Types of Discounting Problems
• The Rule of 72
• 5.4 Making Interest Rates Comparable
• Calculating the Interest Rate and Converting It to an EAR
• To the Extreme: Continuous Compounding
• Finance in a Flat World: Financial Access at Birth
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Chapter 6: The Time Value of Money—Annuities and Other Topics
• Principle 1: Money Has a Time Value
• Principle 3: Cash Flows Are the Source of Value
• 6.1 Annuities
• Ordinary Annuities
• Amortized Loans
• Annuities Due
• Finance for Life: Saving for Retirement: Being an Early Bird
• 6.2 Perpetuities
• Calculating the Present Value of a Level Perpetuity
• Calculating the Present Value of a Growing Perpetuity
• 6.3 Complex Cash Flow Streams
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Chapter 7: An Introduction to Risk and Return—History of Financial Market Returns
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 4: Market Prices Reflect Information
• 7.1 Realized and Expected Rates of Return and Risk
• Calculating the Realized Return from an Investment
• Calculating the Expected Return from an Investment
• Measuring Risk
• 7.2 A Brief History of Financial Market Returns
• U.S. Financial Markets: Domestic Investment Returns
• Lessons Learned
• U.S. Stocks Versus Other Categories of Investments
• Global Financial Markets: International Investing
• Finance for Life: Your Personal Financial Risk Tolerance
• 7.3 Geometric Versus Arithmetic Average Rates of Return
• Computing the Geometric or Compound Average Rate of Return
• Choosing the Right “Average”
• 7.4 What Determines Stock Prices
• The Efficient Markets Hypothesis
• Do We Expect Financial Markets to Be Perfectly Efficient
• Market Efficiency: What Does the Evidence Show
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Chapter 8: Risk and Return—Capital Market Theory
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 4: Market Prices Reflect Information
• 8.1 Portfolio Returns and Portfolio Risk
• Calculating the Expected Return of a Portfolio
• Evaluating Portfolio Risk
• Calculating the Standard Deviation of a Portfolio’s Returns
• Finance in a Flat World: International Diversification
• 8.2 Systematic Risk and the Market Portfolio
• Diversification and Unsystematic Risk
• Diversification and Systematic Risk
• Systematic Risk and Beta
• Calculating the Portfolio Beta
• 8.3 The Security Market Line and the CAPM
• Using the CAPM to Estimate Expected Rates of Return
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Chapter 9: Debt Valuation and Interest Rates
• Principle 1: Money Has a Time Value
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 3: Cash Flows Are the Source of Value
• 9.1 Overview of Corporate Debt
• Borrowing Money in the Private Financial Market
• Borrowing Money in the Public Financial Market
• Basic Bond Features
• Finance for Life: Buying a House in the United Kingdom
• 9.2 Valuing Corporate Debt
• Valuing Bonds by Discounting Future Cash Flows
• Step 1: Determine Bondholder Cash Flows
• Step 2: Estimate the Appropriate Discount Rate
• Step 3: Calculate the Present Value Using the Discounted Cash Flow
• 9.3 Bond Valuation: Four Key Relationships
• Relationship 1
• Relationship 2
• Relationship 3
• Relationship 4
• 9.4 Types of Bonds
• Secured Versus Unsecured
• Priority of Claims
• Initial Offering Market
• Abnormal Risk
• Coupon Level
• Amortizing or Non-amortizing
• Convertibility
• Finance in a Flat World: International Bonds
• 9.5 Determinants of Interest Rates
• Inflation and Real Versus Nominal Interest Rates
• Interest Rate Determinants—Breaking It Down
• The Maturity-Risk Premium and the Term Structure of Interest Rates
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Chapter 10: Stock Valuation
• Principle 1: Money Has a Time Value
• Principle 2: There Is a Risk-Reward Tradeoff
• Principle 3: Cash Flows Are the Source of Value
• Principle 4: Market Prices Reflect Information
• Principle 5: Individuals Respond to Incentives
• 10.1 Common Stock
• Characteristics of Common Stock
• Finance for Life: Stock Valuation Practices: Scientific Methods or Emotional Reactions
• Agency Costs and Common Stock
• Valuing Common Stock Using the Discounted Dividend Model
• 10.2 The Comparables Approach to Valuing Common Stock
• Defining the P/E Ratio Valuation Model
• What Determines the P/E Ratio for a Stock
• An Aside on Managing for Shareholder Value
• A Word of Caution About P/E Ratios
• 10.3 Preferred Stock
• Features of Preferred Stock
• Valuing Preferred Stock
• A Quick Review: Valuing Bonds, Preferred Stock, and Common Stock
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Part 3: Capital Budgeting
• Chapter 11: Investment Decision Criteria
• Principle 1: Money Has a Time Value
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 3: Cash Flows Are the Source of Value
• Principle 5: Individuals Respond to Incentives
• 11.1 An Overview of Capital Budgeting
• The Typical Capital-Budgeting Process
• What Are the Sources of Good Investment Projects
• Types of Capital Investment Projects
• 11.2 Net Present Value
• Why Is the NPV the Right Criterion
• Calculating an Investment’s NPV
• Independent Versus Mutually Exclusive Investment Projects
• 11.3 Other Investment Criteria
• Profitability Index
• Internal Rate of Return
• Modified Internal Rate of Return
• Finance for Life: Higher Education as an Investment in Yourself
• Payback Period
• Discounted Payback Period
• Summing Up the Alternative Decision Rules
• 11.4 A Glance at Actual Capital-Budgeting Practices
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Cases
• Chapter 12: Analyzing Project Cash Flows
• Principle 3: Cash Flows Are the Source of Value
• Principle 5: Individuals Respond to Incentives
• 12.1 Project Cash Flows
• Incremental Cash Flows Are What Matters
• Guidelines for Forecasting Incremental Cash Flows
• 12.2 Forecasting Project Cash Flows
• Dealing with Depreciation Expense, Taxes, and Cash Flow
• Four-Step Procedure for Calculating Project Cash Flows
• Computing Project NPV
• 12.3 Inflation and Capital Budgeting
• Estimating Nominal Cash Flows
• 12.4 Replacement Project Cash Flows
• Category 1: Initial Outlay, CF0
• Category 2: Annual Cash Flows
• Replacement Example
• Finance in a Flat World: Entering New Markets
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Cases
• Appendix: The Modified Accelerated Cost Recovery System
• Chapter 13: Risk Analysis and Project Evaluation
• Principle 1: Money Has a Time Value
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 3: Cash Flows Are the Source of Value
• 13.1 The Importance of Risk Analysis
• 13.2 Tools for Analyzing the Risk of Project Cash Flows
• Key Concepts: Expected Values and Value Drivers
• Sensitivity Analysis
• Scenario Analysis
• Simulation Analysis
• Finance in a Flat World: Currency Risk
• 13.3 Break-Even Analysis
• Accounting Break-Even Analysis
• Cash Break-Even Analysis
• NPV Break-Even Analysis
• Operating Leverage and the Volatility of Project Cash Flows
• 13.4 Real Options in Capital Budgeting
• The Option to Delay the Launch of a Project
• The Option to Expand a Project
• The Option to Reduce the Scale and Scope of a Project
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Chapter 14: The Cost of Capital
• Principle 1: Money Has a Time Value
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 3: Cash Flows Are the Source of Value
• Principle 4: Market Prices Reflect Information
• Principle 5: Individuals Respond to Incentives
• 14.1 The Cost of Capital: An Overview
• Investor’s Required Return and the Firm’s Cost of Capital
• WACC Equation
• Three-Step Procedure for Estimating the Firm’s WACC
• 14.2 Determining the Firm’s Capital Structure Weights
• 14.3 Estimating the Cost of Individual Sources of Capital
• The Cost of Debt
• The Cost of Preferred Equity
• The Cost of Common Equity
• 14.4 Summing Up: Calculating the Firm’s WACC
• Use Market-Based Weights
• Use Market-Based Costs of Capital
• Use Forward-Looking Weights and Opportunity Costs
• Weighted Average Cost of Capital in Practice
• 14.5 Estimating Project Costs of Capital
• The Rationale for Using Multiple Discount Rates
• Why Don’t Firms Typically Use Project Costs of Capital
• Estimating Divisional WACCs
• Divisional WACC: Estimation Issues and Limitations
• Finance in a Flat World: Why Do Interest Rates Differ Among Countries
• 14.6 Flotation Costs and Project NPV
• WACC, Flotation Costs, and the NPV
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Part 4: Capital Structure and Dividend Policy
• Chapter 15: Capital Structure Policy
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 3: Cash Flows Are the Source of Value
• Principle 5: Individuals Respond to Incentives
• 15.1 A Glance at Capital Structure Choices in Practice
• Defining a Firm’s Capital Structure
• Financial Leverage
• How Do Firms in Different Industries Finance Their Assets
• 15.2 Capital Structure Theory
• A First Look at the Modigliani and Miller Capital Structure Theorem
• Yogi Berra and the M&M Capital Structure Theory
• Capital Structure, the Cost of Equity, and the Weighted Average Cost of Capital
• Why Capital Structure Matters in Reality
• Making Financing Choices When Managers Are Better Informed than Shareholders
• Managerial Implications
• 15.3 Why Do Capital Structures Differ Across Industries
• 15.4 Making Financing Decisions
• Benchmarking the Firm’s Capital Structure
• Evaluating the Effect of Financial Leverage on Firm Earnings per Share
• Using the EBIT-EPS Chart to Analyze the Effect of Capital Structure on EPS
• Can the Firm Afford More Debt
• Survey Evidence: Factors That Influence CFO Debt Policy
• Finance in a Flat World: Capital Structures Around the World
• Lease Versus Buy
• Finance for Life: Leasing or Buying a Car
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Appendix: Demonstrating the Modigliani and Miller Theorem
• Chapter 16: Dividend and Share Repurchase Policy
• Principle 1: Money Has a Time Value
• Principle 3: Cash Flows Are the Source of Value
• Principle 4: Market Prices Reflect Information
• 16.1 How Do Firms Distribute Cash to Their Shareholders
• Cash Dividends
• Stock Repurchases
• How Do Firms Repurchase Their Shares
• Personal Tax Considerations: Dividend Versus Capital Gains Income
• Noncash Distributions: Stock Dividends and Stock Splits
• 16.2 Does Dividend Policy Matter
• The Irrelevance of the Distribution Choice
• Why Dividend Policy Is Important
• Finance for Life: How Tax Policies Influence Dividend Distribution
• 16.3 Cash Distribution Policies in Practice
• Stable Dividend Payout Policy
• Residual Dividend Payout Policy
• Other Factors Playing a Role in How Much to Distribute
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Part 5: Liquidity Management and Special Topics in Finance
• Chapter 17: Financial Forecasting and Planning
• Principle 2: There Is a Risk-Return Tradeoff
• 17.1 An Overview of Financial Planning
• 17.2 Developing a Long-Term Financial Plan
• Financial Forecasting Example: Ziegen, Inc
• Finance for Life: Your Personal Budget
• 17.3 Developing a Short-Term Financial Plan
• Cash Budget Example: Melco Furniture, Inc
• Uses of the Cash Budget
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Chapter 18: Working-Capital Management
• Principle 2: There Is a Risk-Return Tradeoff
• 18.1 Working-Capital Management and the Risk-Return Tradeoff
• Measuring Firm Liquidity
• Managing Firm Liquidity
• Risk-Return Tradeoff
• 18.2 Working-Capital Policy
• The Principle of Self-Liquidating Debt
• A Graphic Illustration of the Principle of Self-Liquidating Debt
• 18.3 Operating and Cash Conversion Cycles
• Measuring Working-Capital Efficiency
• Calculating the Operating and Cash Conversion Cycles
• 18.4 Managing Current Liabilities
• Calculating the Cost of Short-Term Financing
• Evaluating the Cost of Trade Credit
• Evaluating the Cost of Bank Loans
• 18.5 Managing the Firm’s Investment in Current Assets
• Managing Cash and Marketable Securities
• Managing Accounts Receivable
• Finance for Life: Your Credit Score
• Managing Inventories
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Chapter 19: International Business Finance
• Principle 2: There Is a Risk-Return Tradeoff
• Principle 3: Cash Flows Are the Source of Value
• 19.1 Foreign Exchange Markets and Currency Exchange Rates
• What a Change in the Exchange Rate Means for Business
• Foreign Exchange Rates
• Types of Foreign Exchange Transactions
• 19.2 Interest Rate and Purchasing-Power Parity
• Interest Rate Parity
• Purchasing-Power Parity and the Law of One Price
• The International Fisher Effect
• 19.3 Capital Budgeting for Direct Foreign Investment
• Finance for Life: International Investing
• Foreign Investment Risks
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Chapter 20: Corporate Risk Management
• Principle 1: Money Has a Time Value
• Principle 2: There Is a Risk-Return Tradeoff
• 20.1 Five-Step Corporate Risk Management Process
• Step 1: Identify and Understand the Firm’s Major Risks
• Step 2: Decide Which Types of Risks to Keep and Which to Transfer
• Step 3: Decide How Much Risk to Assume
• Step 4: Incorporate Risk into All the Firm’s Decisions and Processes
• Step 5: Monitor and Manage the Firm’s Risk Exposure
• 20.2 Managing Risk with Insurance Contracts
• Types of Insurance Contracts
• Why Purchase Insurance
• Finance for Life: Do You Need Life Insurance
• 20.3 Managing Risk by Hedging with Forward Contracts
• Hedging Commodity Price Risk Using Forward Contracts
• Hedging Currency Risk Using Forward Contracts
• 20.4 Managing Risk with Exchange-Traded Financial Derivatives
• Futures Contracts
• Option Contracts
• 20.5 Valuing Options and Swaps
• The Black-Scholes Option Pricing Model
• Swap Contracts
• Credit Default Swaps
• Chapter Summaries
• Study Questions
• Study Problems
• Mini-Case
• Glossary
• Indexes
• Organization Index
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