1. Reviewers
2. Part One Fundamental Concepts and Basic Tools of Finance
3. Chapter 1 Financial Management
4. Learning Objectives
5. 1.1 The Cycle of Money
6. 1.2 Overview of Finance Areas
7. 1.3 Financial Markets
8. 1.4 The Finance Manager and Financial Management
9. 1.5 Objective of the Finance Manager
10. Profit Maximization
11. Maximizing current stock price
12. Maximizing equity value
13. 1.6 Internal and External Players
14. 1.7 The Legal Forms of Business
15. Sole Proprietorship
16. Partnership
17. Corporations
18. Hybrid Corporations
19. Not-for-Profit Corporations
20. 1.8 The Financial Management Setting: The Agency Model
21. 1.9 Corporate Governance and Business Ethics
22. 1.10 Why Study Finance?
23. Employability
24. Key Terms
25. Questions
26. Prepping for Exams
27. Chapter 1 Financial Management At A Glance
28. Chapter 2 Financial Statements
29. Learning Objectives
30. 2.1 Financial Statements
31. The Balance Sheet
32. Cash account
33. Working capital accounts
34. Long-term capital assets accounts
35. Long-term debt (liabilities) accounts
36. Ownership accounts
37. The Income Statement
38. Issue 1: Generally accepted accounting principles
39. Issue 2: Noncash expense items
40. Issue 3: Classifying interest expense as part of the financing decision
41. Statement of Retained Earnings
42. 2.2 Cash Flow Identity and the Statement of Cash Flows
43. The First Component: Cash Flow from Assets
44. The Second Component: Cash Flow to Creditors
45. The Third Component: Cash Flow to Owners
46. Putting It All Together: The Cash Flow Identity
47. The Statement of Cash Flows
48. Free Cash Flow
49. 2.3 Financial Performance Reporting
50. Regulation Fair Disclosure
51. Notes to the Financial Statements
52. 2.4 Financial Statements on the Internet
53. Key Terms
54. Questions
55. Prepping for Exams
56. Problems
57. Advanced Problems for Spreadsheet Application
58. Chapter 2 Financial Statements At A Glance
59. Chapter 3 The Time Value of Money (Part 1)
60. Learning Objectives
61. 3.1 Future Value and Compounding Interest
62. The Single-Period Scenario
63. The Multiple-Period Scenario
64. Methods of Solving Future Value Problems
65. Method 1: The equation
66. Method 2: The TVM keys
67. Method 3: The spreadsheet
68. 3.2 Present Value and Discounting
69. The Single-Period Scenario
70. The Multiple-Period Scenario
71. The Use of Time Lines
72. 3.3 One Equation and Four Variables
73. 3.4 Applications of the Time Value of Money Equation
74. 3.5 Doubling of Money: The Rule of 72
75. Key Terms
76. Questions
77. Prepping for Exams
78. Problems
79. Advanced Problems for Spreadsheet Application
80. Chapter 3 The Time Value of Money (Part 1) At A Glance
81. Chapter 4 The Time Value of Money (Part 2)
82. Learning Objectives
83. 4.1 Future Value of Multiple Payment Streams
84. 4.2 Future Value of an Annuity Stream
85. Future Value of an Annuity: An Application
86. 4.3 Present Value of an Annuity
87. 4.4 Annuity Due and Perpetuity
88. Perpetuity
89. 4.5 Three Loan Payment Methods
90. Interest and Principal at Maturity of Loan (Discount Loan)
91. Interest as You Go, Principal at Maturity of Loan (Interest-Only Loan)
92. Interest and Principal as You Go (Amortized Loan)
93. 4.6 Amortization Schedules
94. 4.7 Waiting Time and Interest Rates for Annuities
95. 4.8 Solving a Lottery Problem
96. 4.9 Ten Important Points about the TVM Equation
97. Key Terms
98. Questions
99. Prepping for Exams
100. Problems
101. Advanced Problems for Spreadsheet Application
102. Chapter 4 The Time Value of Money (Part 2) At A Glance
103. Chapter 5 Interest Rates
104. Learning Objectives
105. 5.1 How Financial Institutions Quote Interest Rates: Annual and Periodic Interest Rates
106. 5.2 Effect of Compounding Periods on the Time Value of Money Equations
107. 5.3 Consumer Loans and Amortization Schedules
108. 5.4 Nominal and Real Interest Rates
109. 5.5 Risk-Free Rate and Premiums
110. Maturity Premiums
111. 5.6 Yield Curves
112. 5.7 A Brief History of Interest Rates and Inflation in the United States
113. Key Terms
114. Questions
115. Prepping for Exams
116. Problems
117. Advanced Problems for Spreadsheet Application
118. Chapter 5 Interest Rates At A Glance
119. Part Two Valuing Stocks and Bonds and Understanding Risk and Return
120. Chapter 6 Bonds and Bond Valuation
121. Learning Objectives
122. 6.1 Application of the Time Value of Money Tool: Bond Pricing
123. Key Components of a Bond
124. Pricing a Bond in Steps
125. Method 1: Using the equation
126. Method 2: Using the TVM keys
127. Method 3: Using a spreadsheet
128. 6.2 Semiannual Bonds and Zero-Coupon Bonds
129. Pricing Bonds after Original Issue
130. Method 1: Using the equation
131. Method 2: Using the TVM keys
132. Method 3: Using a spreadsheet
133. Zero-Coupon Bonds
134. Amortization of a Zero-Coupon Bond
135. 6.3 Yields and Coupon Rates
136. The First Interest Rate: Yield to Maturity
137. Method 1: Using the equation
138. Method 2: Using the TVM keys
139. Method 3: Using a spreadsheet
140. The “Other” Interest Rate: Coupon Rate
141. Relationship of Yield to Maturity and Coupon Rate
142. 6.4 Bond Ratings
143. 6.5 Some Bond History and More Bond Features
144. 6.6 U.S. Government Bonds
145. Pricing a U.S. Government Note or Bond
146. Method 2: Using the TVM keys
147. Method 3: Using a spreadsheet
148. Pricing a Treasury Bill
149. Key Terms
150. Questions
151. Prepping for Exams
152. Problems
153. Advanced Problems for Spreadsheet Application
154. Chapter 6 Bonds and Bond Valuation At A Glance
155. Chapter 7 Stocks and Stock Valuation
156. Learning Objectives
157. 7.1 Characteristics of Common Stock
158. Ownership
159. Claim on Assets and Cash Flow (Residual Claim)
160. Vote (Voice in Management)
161. No Maturity Date
162. Dividends and Their Tax Effect
163. Authorized, Issued, and Outstanding Shares
164. Treasury Stock
165. Preemptive Rights
166. 7.2 Stock Markets
167. Primary Markets
168. Secondary Markets: How Stocks Trade
169. Bull Markets and Bear Markets
170. 7.3 Stock Valuation
171. The Constant Dividend Model with an Infinite Horizon
172. The Constant Dividend Model with a Finite Horizon
173. Method 1: Using the equation
174. Method 2: Using the TVM keys
175. The Constant Growth Dividend Model with an Infinite Horizon
176. The Constant Growth Dividend Model with a Finite Horizon
177. Nonconstant Growth Dividends
178. 7.4 Dividend Model Shortcomings
179. 7.5 Preferred Stock
180. 7.6 Efficient Markets
181. Operational Efficiency
182. Informational Efficiency
183. Key Terms
184. Questions
185. Prepping for Exams
186. Problems
187. Advanced Problems for Spreadsheet Application
188. Chapter 7 Stocks and Stock Valuation At A Glance
189. Chapter 8 Risk and Return
190. Learning Objectives
191. 8.1 Returns
192. Dollar Profits and Percentage Returns
193. Converting Holding Period Returns to Annual Returns
194. Method 1: Using equations
195. Method 2: Using the TVM keys
196. Extrapolating Holding Period Returns
197. 8.2 Risk (Certainty and Uncertainty)
198. 8.3 Historical Returns
199. 8.4 Standard Deviation as a Measure of Risk
200. Normal Distributions
201. 8.5 Returns in an Uncertain World (Expectations and Probabilities)
202. Determining the Probabilities of All Potential Outcomes
203. 8.6 The Risk-and-Return Trade-Off
204. Investment Rules
205. 8.7 Diversification: Minimizing Risk or Uncertainty
206. When Diversification Works
207. Adding More Stocks to the Portfolio: Systematic and Unsystematic Risk
208. 8.8 Beta: The Measure of Risk in a Well-Diversified Portfolio
209. 8.9 The Capital Asset Pricing Model and the Security Market Line
210. The Capital Asset Pricing Model
211. Application of the SML
212. Key Terms
213. Questions
214. Prepping for Exams
215. Problems
216. Advanced Problems for Spreadsheet Application
217. Chapter 8 Risk and Return At A Glance
218. Part Three Capital Budgeting
219. Chapter 9 Capital Budgeting Decision Models
220. Learning Objectives
221. 9.1 Short-Term and Long-Term Decisions
222. 9.2 Payback Period and Discounted Payback Period
223. Payback Period
224. Discounted Payback Period
225. 9.3 Net Present Value
226. Mutually Exclusive versus Independent Projects
227. Unequal Lives of Projects
228. Net Present Value Example: Equation and Calculator Function
229. 9.4 Internal Rate of Return and Modified Internal Rate of Return
230. Internal Rate of Return
231. Appropriate discount rate or hurdle rate
232. Problems with the internal rate of return
233. Multiple Internal Rates of Return
234. Reinvestment and Crossover Rates
235. Modified Internal Rate of Return
236. 9.5 Profitability Index
237. 9.6 Overview of Six Decision Models
238. Capital Budgeting Using a Spreadsheet
239. Key Terms
240. Questions
241. Prepping for Exams
242. Problems
243. Advanced Problems for Spreadsheet Application
244. Chapter 9 Capital Budgeting Decision Models At A Glance
245. Chapter 10 Cash Flow Estimation
246. Learning Objectives
247. 10.1 The Importance of Cash Flow
248. 10.2 Estimating Cash Flow for Projects: Incremental Cash Flow
249. Sunk Costs
250. Opportunity Costs
251. Erosion Costs
252. Synergy Gains
253. Working Capital
254. 10.3 Capital Spending and Depreciation
255. Straight-Line Depreciation
256. Modified Accelerated Cost Recovery System
257. 10.4 Cash Flow and the Disposal of Capital Equipment
258. 10.5 Projected Cash Flow for a New Product
259. Key Terms
260. Questions
261. Prepping for Exams
262. Problems
263. Advanced Problems for Spreadsheet Application
264. Chapter 10 Cash Flow Estimation At A Glance
265. Chapter 11 The Cost of Capital
266. Learning Objectives
267. 11.1 The Cost of Capital: A Starting Point
268. 11.2 Components of the Weighted Average Cost of Capital
269. Debt Component
270. Preferred Stock Component
271. Equity Component
272. The security market line approach to Re
273. The dividend growth model approach to Re
274. Retained Earnings
275. The Debt Component and Taxes
276. 11.3 Weighting the Components: Book Value or Market Value?
277. Book Value
278. Adjusted Weighted Average Cost of Capital
279. Market Value
280. 11.4 Using the Weighted Average Cost of Capital in a Budgeting Decision
281. The Weighted Average Cost of Capital for Individual Projects
282. 11.5 Selecting Appropriate Betas for Projects
283. 11.6 Constraints on Borrowing and Selecting ­Projects for the Portfolio
284. Key Terms
285. Questions
286. Prepping for Exams
287. Problems
288. Advanced Problems for Spreadsheet Application
289. Chapter 11 The Cost of Capital At A Glance
290. Part Four Financial Planning and Evaluating Performance
291. Chapter 12 Forecasting and Short-Term Financial Planning
292. Learning Objectives
293. 12.1 Sources and Uses of Cash
294. 12.2 Cash Budgeting and the Sales Forecast
295. Cash Inflow from Sales
296. Other Cash Receipts
297. 12.3 Cash Outflow from Production
298. 12.4 The Cash Forecast: Short-Term Deficits and Short-Term Surpluses
299. Funding Cash Deficits
300. Investing Cash Surpluses
301. 12.5 Planning with Pro Forma Financial Statements
302. Pro Forma Income Statement
303. Pro Forma Balance Sheet
304. Key Terms
305. Questions
306. Prepping for Exams
307. Problems
308. Advanced Problems for Spreadsheet Application
309. Chapter 12 Forecasting and Short-Term Financial Planning At A Glance
310. Chapter 13 Working Capital Management
311. Learning Objectives
312. 13.1 The Cash Conversion Cycle
313. Average Production Cycle
314. Average Collection Cycle
315. Average Payment Cycle
316. Putting It All Together: The Cash Conversion Cycle
317. 13.2 Managing Accounts Receivable and Setting Credit Policy
318. Collecting Accounts Receivable
319. Credit: A Two-Sided Coin
320. Qualifying for Credit
321. Setting Payment Policy
322. Collecting Overdue Debt
323. 13.3 The Float
324. Speeding Up the Collection Float (Shortening the Lag Time)
325. Extending the Disbursement Float (Lengthening the Lag Time)
326. 13.4 Inventory Management: Carrying Costs and Ordering Costs
327. ABC Inventory Management
328. Redundant Inventory Items
329. Economic Order Quantity
330. The trade-off between ordering costs and carrying costs
331. Measuring ordering costs
332. Measuring carrying costs
333. Reorder point and safety stock
334. Just in Time
335. 13.5 The Effect of Working Capital on Capital Budgeting
336. Inventories and Daily Operations
337. Key Terms
338. Questions
339. Prepping for Exams
340. Problems
341. Advanced Problems for Spreadsheet Application
342. Chapter 13 Working Capital Management At A Glance
343. Chapter 14 Financial Ratios and Firm Performance
344. Learning Objectives
345. 14.1 Financial Statements
346. Benchmarking
347. 14.2 Financial Ratios
348. Short-Term Solvency: Liquidity Ratios
349. Long-Term Solvency: Financial Leverage Ratios
350. Asset Management Ratios
351. Profitability Ratios
352. Market Value Ratios
353. DuPont Analysis
354. 14.3 External Uses of Financial Statements and Industry Averages
355. Cola Wars
356. Industry Ratios
357. Key Terms
358. Questions
359. Prepping for Exams
360. Problems
361. Advanced Problems for Spreadsheet Application
362. Chapter 14 Financial Ratios and Firm Performance At A Glance
363. Part Five Other Selected Finance Topics
364. Chapter 15 Raising Capital
365. Learning Objectives
366. 15.1 The Business Life Cycle
367. 15.2 Borrowing for a Start-Up and a Growing Business
368. Personal Funds and Family Loans
369. Commercial Bank Loans
370. Commercial Bank Loans through the Small Business Administration
371. Angel Financing and Venture Capital
372. Financial strength
373. Contacts
374. Exit strategy
375. 15.3 Borrowing for a Stable and Mature Business: Taking Out Bank Loans
376. Straight Loans
377. Discount Loans
378. Letters of Credit or Lines of Credit
379. Compensating Balance Loans
380. 15.4 Borrowing for a Stable and Mature Business: Selling Bonds
381. 15.5 Borrowing for a Stable and Mature Business: Selling Stock
382. Initial Public Offerings and Underwriting
383. Registration, Prospectus, and Tombstone
384. The Marketing Process: Road Show
385. The Auction
386. The Aftermarket: Dealer in the Shares
387. 15.6 Other Borrowing Options for a Mature Business
388. 15.7 The Final Phase: Closing the Business
389. Straight Liquidation: Chapter 7
390. Reorganization: Chapter 11
391. Key Terms
392. Questions
393. Prepping for Exams
394. Problems
395. Advanced Problems for Spreadsheet Application
396. Chapter 15 Raising Capital At A Glance
397. Chapter 16 Capital Structure
398. Learning Objectives
399. 16.1 Capital Markets: A Quick Review
400. 16.2 Benefits of Debt
401. Earnings per Share as a Measure of the Benefits of Borrowing
402. 16.3 Break-Even Earnings for Different Capital Structures
403. 16.4 Pecking Order
404. Firms Prefer Internal Financing First
405. Firms Choose to Issue the Cheapest Security First and Use Equity as a Last Resort
406. 16.5 Modigliani and Miller on Optimal Capital Structure
407. Capital Structure in a World of No Taxes and No Bankruptcy
408. M&M Proposition I
409. M&M Proposition II
410. Capital Structure in a World of Corporate Taxes and No Bankruptcy
411. Debt and the Tax Shield
412. 16.6 The Static Theory of Capital Structure
413. Bankruptcy
414. Optimal Capital Structure
415. Key Terms
416. Questions
417. Prepping for Exams
418. Problems
419. Advanced Problems for Spreadsheet Application
420. Chapter 16 Capital Structure At A Glance
421. Chapter 17 Dividends, Dividend Policy, and Stock Splits
422. Learning Objectives
423. 17.1 Cash Dividends
424. Buying and Selling Stock
425. Declaring and Paying a Cash Dividend: A Chronology
426. Different Types of Dividends
427. Regular cash dividends
428. Special or extra cash dividends
429. Stock dividends
430. Liquidating dividends
431. 17.2 Dividend Policy
432. Dividend Clienteles
433. Dividend Policy Irrelevance
434. Dividend policy in a world of no taxes and no transaction costs
435. Dividends in a world of taxes
436. Reasons Favoring a Low- or No-Dividend-Payout Policy
437. Tax advantages
438. Higher potential returns from positive net present value projects
439. Less need for outside funding
440. Reasons Favoring a High-Dividend-Payout Policy
441. Freedom from transaction costs
442. Certainty versus uncertainty
443. Optimal Dividend Policy
444. 17.3 Selecting a Dividend Policy
445. Some Further Considerations in the Selection of a Dividend Policy
446. Restrictions on legal capital
447. Restrictive bond covenants
448. Cash availability
449. 17.4 Stock Dividends, Stock Splits, and Reverse Splits
450. Reasons for Stock Splits
451. Preferred trading range
452. Signaling hypothesis
453. Increased liquidity
454. Reverse Splits
455. 17.5 Specialized Dividend Plans
456. Stock Repurchase
457. Dividend Reinvestment Plans
458. Key Terms
459. Questions
460. Prepping for Exams
461. Problems
462. Advanced Problems for Spreadsheet Application
463. Chapter 17 Dividends, Dividend Policy, and Stock Splits At A Glance
464. Chapter 18 International Financial Management
465. Learning Objectives
466. 18.1 Managing Multinational Operations
467. Cultural Risk
468. Differences in ownership structure
469. Differences in human resource norms
470. Religious heritage of the host country
471. Nepotism and corrupt practices in the host country
472. Intellectual property rights
473. Business Risk
474. Political Risk
475. 18.2 Foreign Exchange
476. Purchasing Power Parity
477. Currency Exchange Rates
478. Cross Rates
479. Arbitrage Opportunities
480. Forward Rates
481. Using Forward Rates
482. Changing Spot Rates
483. 18.3 Transaction, Operating, and Translation Exposures
484. Transaction Exposure
485. Operating Exposure
486. Translation Exposure
487. 18.4 Foreign Investment Decisions
488. Key Terms
489. Questions
490. Prepping for Exams
491. Problems
492. Advanced Problems for Spreadsheet Application
493. Questions
494. Chapter 18 International Financial Management At A Glance
495. Appendix 1 Future Value Interest Factors
496. Appendix 2 Present Value Interest Factors
497. Appendix 3 Future Value Interest Factors of an Annuity
498. Appendix 4 Present Value Interest Factors of an Annuity
499. Appendix 5 Answers to Prepping for Exam Question

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