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Fundamentals of Financial Management (with Thomson ONE - Business School Edition)

by ;
Edition:
11th
ISBN13:

9780324319804

ISBN10:
0324319800
Format:
Hardcover
Pub. Date:
3/3/2006
Publisher(s):
Thomson South-Western
List Price: $394.99

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Summary

"Brigham/Houston: A Classic, redefined...because a classic never goes out of style." The market leader, Brigham/Houston, continues to grow in reputation and amount of users as the most effective approach for teaching the first undergraduate corporate finance course. The seamless, integrated ancillary package, still painstakingly prepared by the authors, is a hallmark of the Brigham/Houston package which reduces course preparation time for instructors and makes the subject more accessible for learners. New for this edition is the addition of iLrn Finance, an online student assessment and tutorial resource to help improve student performance. Additionally, access to Thomson ONE - Business School Edition, an online financial database that students can use to complete projects or select end of chapter exercises, is included with each new text.

Table of Contents

PREFACE iii
Part 1 Introduction to Financial Management
1(22)
An Overview of Financial Management
2(21)
Striking the Right Balance
2(1)
Putting Things in Perspective
3(1)
Forms of Business Organization
4(2)
Stock Prices and Shareholder Value
6(2)
Intrinsic Values, Stock Prices, and Compensation Plans
8(3)
Some Important Trends
11(1)
Is Shareholder Wealth Maximization a Worldwide Goal?
12(1)
Business Ethics
12(4)
What Companies Are Doing
13(1)
Consequences of Unethical Behavior
13(1)
How Should Employees Deal with Unethical Behavior?
14(1)
Protection for Whistle-Blowers
15(1)
Conflicts between Managers and Stockholders
16(1)
The Role of Finance in the Organization
17(6)
Tying it all Together
18(5)
Part 2 Fundamental Concepts in Financial Management
23(150)
Time Value of Money
24(40)
Will You Be Able to Retire?
24(1)
Putting Things in Perspective
24(1)
Time Lines
25(1)
Future Values
26(5)
Step-by-Step Approach
27(1)
Formula Approach
27(1)
Simple versus Compound Interest
27(1)
Financial Calculators
28(1)
Spreadsheets
28(1)
Hints on Using Financial Calculators
29(1)
Graphic View of the Compounding Process
30(1)
Present Values
31(3)
Graphic View of the Discounting Process
33(1)
Finding the Interest Rate, I
34(1)
Finding the Number of Years, N
35(1)
Annuities
35(1)
Future Value of an Ordinary Annuity
36(2)
Future Value of an Annuity Due
38(1)
Present Value of an Ordinary Annuity
39(1)
Finding Annuity Payments, Periods, and Interest Rates
40(2)
Finding Annuity Payments, PMT
40(1)
Finding the Number of Periods, N
41(1)
Finding the Interest Rate, I
41(1)
Perpetuities
42(2)
Uneven Cash Flows
44(2)
Future Value of an Uneven Cash Flow Stream
46(1)
Solving for I with Uneven Cash Flows
47(1)
Semiannual and Other Compounding Periods
48(2)
Comparing Interest Rates
50(2)
Fractional Time Periods
52(1)
Amortized Loans
52(12)
Tying it all Together
54(8)
Integrated Case First National Bank
62(2)
Web Appendix 2A Continuous Compounding and Discounting
Financial Statements, Cash Flow, and Taxes
64(36)
Doing Your Homework with Financial Statements
64(1)
Putting Things in Perspective
65(1)
A Brief History of Accounting and Financial Statements
65(1)
Financial Statements and Reports
66(2)
The Balance Sheet
68(4)
The Income Statement
72(3)
Net Cash Flow
75(1)
Statement of Cash Flows
75(3)
Massaging the Cash Flow Statement
78(1)
Statement of Retained Earnings
78(1)
Uses and Limitations of Financial Statements
79(2)
Financial Analysis on the Internet
80(1)
Modifying Accounting Data for Investor and Managerial Decisions
81(5)
Operating Assets and Operating Capital
81(3)
Operating Cash Flows
84(1)
Free Cash Flow
84(2)
Mva and Eva
86(1)
The Federal Income Tax System
87(13)
Corporate Taxes
87(1)
Personal Taxes
87(1)
Interest Paid
87(1)
Interest Earned
88(1)
Dividends Paid
88(1)
Dividends Received
88(1)
Tax Loss Carry-Back and Carry-Forward
88(1)
Capital Gains
88(1)
Depreciation
89(1)
Small Businesses
89(1)
Tying it all Together
89(6)
INTEGRATED CASE D'Leon Inc., Part I
95(5)
Web Appendix 3A The Federal Income Tax System
Analysis of Financial Statements
100(41)
Lessons Learned from Enron and WorldCom
100(2)
Putting Things in Perspective
102(1)
Ratio Analysis
102(1)
Liquidity Ratios
103(1)
Current Ratio
103(1)
Quick, or Acid Test, Ratio
104(1)
Asset Management Ratios
104(4)
Inventory Turnover Ratio
105(1)
Days Sales Outstanding
106(1)
Fixed Assets Turnover Ratio
106(1)
Total Assets Turnover Ratio
107(1)
Debt Management Ratios
108(4)
Total Debt to Total Assets
110(1)
Times-Interest-Earned Ratio
110(1)
EBITDA Coverage Ratio
111(1)
Profitability Ratios
112(3)
Profit Margin on Sales
112(1)
Global Perspectives: Global Accounting Standards: Can One Size Fit All?
113(1)
Return on Total Assets
114(1)
Basic Earning Power (BEP) Ratio
114(1)
Return on Common Equity
115(1)
Market Value Ratios
115(3)
Price/Earnings Ratio
116(1)
Price/Cash Flow Ratio
116(1)
Market/Book Ratio
116(2)
Trend Analysis
118(1)
Tying the Ratios Together: The Du Pont Equations
118(3)
Comparative Ratios and ``Benchmarking''
121(3)
Looking for Warning Signs within the Financial Statements
123(1)
Uses and Limitations of Ratio Analysis
124(1)
Problems with Roe
125(3)
Eva and Roe
126(2)
Looking Beyond the Numbers
128(13)
Tying it all Together
129(7)
INTEGRATED CASE D'Leon Inc., Part II
136(5)
Financial Markets and Institutions
141(32)
A Strong Financial System Is Necessary for a Growing and Prosperous Economy
141(1)
Putting Things in Perspective
142(1)
An Overview of the Capital Allocation Process
143(2)
Financial Markets
145(3)
Types of Markets
145(1)
Recent Trends
146(2)
Financial Institutions
148(5)
The Stock Market
153(4)
Citigroup Built to Compete in a Changing Environment
154(1)
The Physical Location Stock Exchanges
154(1)
The NYSE and Nasdaq Combine Forces with the Leading Online Trading Systems
155(1)
The Over-the-Counter and the Nasdaq Stock Markets
156(1)
The Market for Common Stock
157(3)
Types of Stock Market Transactions
157(3)
Stock Markets and Returns
160(3)
Stock Market Reporting
160(2)
Stock Market Returns
162(1)
Stock Market Efficiency
163(10)
Levels of Market Efficiency
163(1)
Measuring the Market
164(2)
Implications of Market Efficiency
166(1)
Is the Stock Market Efficient?
167(1)
A Closer Look at Behavioral Finance Theory
168(1)
Tying it all Together
169(1)
Integrated Case Smyth Barry & Company, Part I
170(3)
Part 3 Financial Assets
173(154)
Interest Rates
174(33)
Low Interest Rates Encourage Investment and Stimulate Consumer Spending
174(1)
Putting Things in Perspective
175(1)
The Cost of Money
175(1)
Interest Rate Levels
176(4)
The Determinants of Market Interest Rates
180(7)
The Real Risk-Free Rate of Interest, r*
181(1)
The Nominal, or Quoted, Risk-Free Rate of Interest, rRF
182(1)
Inflation Premium (IP)
182(1)
Default Risk Premium (DRP)
183(1)
An Almost Riskless Treasury Bond
184(2)
Liquidity Premium (LP) 186 Maturity Risk Premium (MRP)
186(1)
The Term Structure of Interest Rates
187(2)
What Determines the Shape of the Yield Curve?
189(4)
The Links between Expected Inflation and Interest Rates: A Closer Look
192(1)
Using the Yield Curve to Estimate Future Interest Rates
193(3)
Other Factors that Influence Interest Rate Levels
196(3)
Federal Reserve Policy
196(1)
Federal Budget Deficits or Surpluses
196(1)
International Factors
197(1)
Business Activity
197(1)
Global Perspectives: Measuring Country Risk
198(1)
Investing Overseas
199(1)
Interest Rates and Business Decisions
199(8)
Tying it all Together
201(5)
Integrated Case Smyth Barry & Company, Part II
206(1)
Bonds and Their Valuation
207(37)
Sizing Up Risk in the Bond Market
207(1)
Putting Things in Perspective
208(1)
Who Issues Bonds?
208(1)
Key Characteristics of Bonds
209(4)
Par Value
210(1)
Coupon Interest Rate
210(1)
Maturity Date
210(1)
Call Provisions
211(1)
Sinking Funds
211(1)
Other Features
212(1)
Bond Valuation
213(3)
Bond Yields
216(2)
Yield to Maturity
216(1)
Yield to Call
217(1)
Current Yield
218(1)
Changes in Bond Values Over Time
218(4)
Bonds with Semiannual Coupons
222(1)
Assessing a Bond's Riskiness
223(4)
Interest Rate Risk
223(2)
Reinvestment Rate Risk
225(1)
Comparing Interest Rate and Reinvestment Rate Risk
226(1)
Default Risk
227(7)
Various Types of Corporate Bonds
228(1)
Bond Ratings
229(4)
Bankruptcy and Reorganization
233(1)
Bond Markets
234(10)
Tying it all Together
236(7)
Integrated Case Western Money Management Inc.
243(1)
Web Appendix 7A Zero Coupon Bonds
Web Appendix 7B Bankruptcy and Reorganization
Risk and Rates of Return
244(45)
No Pain No Gain
244(1)
Putting Things in Perspective
245(1)
Stand-Alone Risk
246(11)
Probability Distributions
247(1)
Expected Rate of Return
248(2)
Measuring Stand-Alone Risk: The Standard Deviation
250(2)
Using Historical Data to Measure Risk
252(2)
Measuring Stand-Alone Risk: The Coefficient of Variation
254(1)
Risk Aversion and Required Returns
255(1)
The Trade-Off between Risk and Return
256(1)
Risk in a Portfolio Context
257(14)
Expected Portfolio Returns, r
258(1)
Portfolio Risk
259(4)
The Benefits of Diversification Are More Important Than Ever
263(1)
Diversifiable Risk versus Market Risk
263(3)
The Concept of Beta
266(4)
Global Perspectives: The Benefits of Diversifying Overseas
270(1)
The Relationship between Risk and Rates of Return
271(6)
Estimating the Market Risk Premium
272(3)
The Impact of Inflation
275(1)
Changes in Risk Aversion
275(2)
Changes in a Stock's Beta Coefficient
277(1)
Some Concerns about Beta and the CAPM
277(1)
Some Concluding Thoughts: Implications for Corporate Managers and Investors
278(11)
Tying it all Together
280(6)
Integrated Case Merrill Finch Inc.
286(3)
Web Appendix 8A Calculating Beta Coefficients
Stocks and Their Valuation
289(38)
Searching for the Right Stock
289(1)
Putting Things in Perspective
290(1)
Legal Rights and Privileges of Common Stockholders
290(2)
Control of the Firm
290(1)
The Preemptive Right
291(1)
Types of Common Stock
292(1)
Common Stock Valuation
292(4)
Definitions of Terms Used in Stock Valuation Models
293(1)
Expected Dividends as the Basis for Stock Values
294(2)
Constant Growth Stocks
296(3)
Illustration of a Constant Growth Stock
296(1)
Dividend and Earnings Growth
297(1)
When Can the Constant Growth Model Be Used?
298(1)
Expected Rate of Return on a Constant Growth Stock
299(1)
Valuing Stocks Expected to Grow at a Nonconstant Rate
300(5)
Evaluating Stocks That Don't Pay Dividends
304(1)
Valuing the Entire Corporation
305(5)
The Corporate Valuation Model
306(2)
Other Approaches to Valuing Common Stocks
308(1)
Comparing the Total Company and Dividend Growth Models
308(2)
Stock Market Equilibrium
310(3)
Changes in Equilibrium Stock Prices
311(2)
Investing in International Stocks
313(2)
Preferred Stock
315(12)
Global Perspectives: Investing in Emerging Markets
316(1)
Tying it all Together
316(6)
Integrated Case Mutual of Chicago Insurance Company
322(5)
Part 4 Investing in Long-Term Assets: Capital Budgeting
327(108)
The Cost of Capital
328(29)
Creating Value at GE
328(1)
Putting Things in Perspective
329(1)
An Overview of the Weighted Average Cost of Capital
329(2)
Basic Definitions
331(1)
Cost of Debt, rd(1 - T)
332(1)
Cost of Preferred Stock, rp
333(2)
Funny-Named Preferred-Like Securities
334(1)
Cost of Retained Earnings, rs
335(5)
The Capm Approach
336(1)
Dividend-Yield-plus-Growth-Rate, or Discounted Cash Flow (DCF), Approach
336(3)
Bond-Yield-plus-Risk-Premium Approach
339(1)
How Much Does It Cost to Raise External Capital?
340(1)
Cost of New Common Stock, re
340(3)
Add Flotation Costs to a Project's Cost
341(1)
Increase the Cost of Capital
341(1)
When Must External Equity Be Used?
342(1)
Composite, or Weighted Average, Cost of Capital, WACC
343(1)
Factors That Affect the WACC
344(2)
Factors the Firm Cannot Control
344(1)
Factors the Firm Can Control
344(1)
Global Perspectives: Global Variations in the Cost of Capital
345(1)
Adjusting the Cost of Capital for Risk
346(2)
Some Other Problems with Cost of Capital Estimates
348(9)
Tying it all Together
349(6)
Integrated Case Coleman Technologies Inc.
355(2)
Web Appendix 10A The Cost of New Common Stock and the WACC
The Basics of Capital Budgeting
357(30)
Competition in the Aircraft Industry
357(1)
Putting Things in Perspective
358(1)
Generating Ideas for Capital Projects
358(1)
Project Classifications
359(1)
The Net Present Value (NPV) Criterion
360(3)
Internal Rate of Return (IRR)
363(1)
Comparison of the NPV and IRR Methods
364(5)
Npv Profiles
364(1)
Npv Rankings Depend on the Cost of Capital
365(2)
Independent Projects
367(1)
Mutually Exclusive Projects
367(2)
Multiple IRRs
369(2)
Modified Internal Rate of Return (MIRR)
371(2)
Payback Period
373(2)
Conclusions on Capital Budgeting Methods
375(1)
Decision Criteria Used in Practice
376(1)
Using Capital Budgeting Techniques in Other Contexts
377(1)
The Post-Audit
378(9)
Tying it all Together
379(6)
Integrated Case Allied Components Company
385(2)
Cash Flow Estimation and Risk Analysis
387(28)
Home Depot Keeps Growing
387(1)
Putting Things in Perspective
388(1)
Background on the Project
388(2)
Project Analysis
390(4)
Input Data, Part 1
390(1)
Depreciation Schedule, Part 2
390(1)
Salvage Value Calculations, Part 3
391(1)
Projected Cash Flows, Part 4
392(1)
Appraisal of the Proposed Project, Part 5
393(1)
Other Points on Cash Flow Analysis
394(3)
Cash Flow versus Accounting Income
394(1)
Timing of Cash Flows
395(1)
Incremental Cash Flows
395(1)
Replacement Projects
395(1)
Sunk Costs
395(1)
Opportunity Costs
396(1)
Externalities
396(1)
Estimating Project Risk
397(1)
Measuring Stand-Alone Risk
398(5)
Sensitivity Analysis
398(2)
Scenario Analysis
400(1)
Monte Carlo Simulation
401(1)
Global Perspectives: Capital Budgeting Practices in the Asian/Pacific Region
402(1)
Different Capital Structures
403(1)
Incorporating Risk into Capital Budgeting
403(12)
Tying it all Together
404(5)
Integrated Case Allied Food Products
409(4)
APPENDIX 12A Tax Depredation
413(2)
Web APPENDIX 12B Replacement Project Analysis
Web APPENDIX 12C Refunding Operations
Web APPENDIX 12D Using the CAPM to Estimate the Risk-Adjusted Cost of Capital
Web APPENDIX 12E Techniques for Measuring Beta Risk
Real Options and Other Topics in Capital Budgeting
415(20)
Keeping Your Options Open
415(1)
Putting Things in Perspective
416(1)
Introduction to Real Options
416(1)
Abandonment/Shutdown Options
417(2)
Investment Timing Options
419(1)
Growth Options
420(1)
Flexibility Options
421(1)
Comparing Mutually Exclusive Projects with Unequal Lives
422(2)
Replacement Chains
422(1)
Equivalent Annual Annuities (EAA)
423(1)
Conclusions about Unequal Lives
424(1)
The Optimal Capital Budget
424(11)
Tying it all Together
426(5)
Integrated Case
21st Century Educational Products
431(4)
Part 5 Capital Structure and Dividend Policy
435(76)
Capital Structure and Leverage
436(1)
Debt; Rocket Booster or Anchor?
436(1)
Putting Things in Perspective
437(1)
The Target Capital Structure
437(2)
Business and Financial Risk
439(11)
Business Risk
439(2)
Operating Leverage
441(3)
Financial Risk
444(6)
Determining the Optimal Capital Structure
450(6)
Wacc and Capital Structure Changes
450(2)
The Hamada Equation
452(1)
The Optimal Capital Structure
453(3)
Capital Structure Theory
456(6)
Yogi Berra on the M&M Proposition
457(1)
The Effect of Taxes
457(1)
The Effect of Potential Bankruptcy
458(1)
Trade-Off Theory
459(1)
Signaling Theory
460(1)
Using Debt Financing to Constrain Managers
461(1)
Checklist for Capital Structure Decisions
462(3)
Global Perspectives: Taking a Look at Global Capital Structures
465(1)
Variations in Capital Structures
465(13)
Tying it all Together
466(6)
Integrated Case Campus Deli Inc.
472(6)
Web APPENDIX 14A Degree of Leverage
Distributions to Shareholders: Dividends and Share Repurchases
478(33)
Microsoft Shifts Gears and Begins to Unload Part of Its Vast Cash Hoard
478(1)
Putting Things in Perspective
479(1)
Dividends versus Capital Gains: What Do Investors Prefer?
479(3)
Dividend Irrelevance Theory
480(1)
Reasons Some Investors Prefer Dividends
480(1)
Reasons Some Investors May Prefer Capital Gains
481(1)
Other Dividend Policy Issues
482(1)
Information Content, or Signaling, Hypothesis
482(1)
Clientele Effect
482(1)
Establishing the Dividend Policy in Practice
483(10)
Setting the Target Payout Ratio: The Residual Dividend Model
483(5)
Global Perspectives: Dividend Yields Around the World
488(1)
Earnings, Cash Flows, and Dividends
489(1)
Payment Procedures
490(3)
Dividend Reinvestment Plans
493(1)
Summary of Factors Influencing Dividend Policy
494(1)
Constraints
494(1)
Investment Opportunities
494(1)
Alternative Sources of Capital
495(1)
Effects of Dividend Policy on rs
495(1)
Stock Dividends and Stock Splits
495(3)
Stock Splits
496(1)
Stock Dividends
496(1)
Effect on Stock Prices
497(1)
Stock Repurchases
498(13)
The Effects of Stock Repurchases
498(1)
Stock Repurchases Soar in 2004
499(1)
Advantages of Repurchases
500(1)
Disadvantages of Repurchases
501(1)
Conclusions on Stock Repurchases
501(1)
Tying it all Together
502(6)
Integrated Case Southeastern Steel Company
508(3)
Web APPENDIX 15A An Example: The Residual Dividend Model
Part 6 Working Capital and Financial Planning
511(66)
Working Capital Management
512(40)
Best Buy Successfully Manages its Working Capital
512(1)
Putting Things in Perspective
512(1)
Working Capital Terminology
513(1)
The Cash Conversion Cycle
513(4)
Calculating the Targeted CCC
514(1)
Calculating the Actual CCC
515(1)
Some Firms Operate with Negative Working Capital!
516(1)
Alternative Current Asset Investment Policies
517(1)
Alternative Current Asset Financing Policies
518(3)
Maturity Matching, or ``Self-Liquidating,'' Approach
519(1)
Aggressive Approach
519(1)
Conservative Approach
519(2)
Choosing between the Approaches
521(1)
The Cash Budget
521(4)
Cash and Marketable Securities
525(3)
Currency
526(1)
Demand Deposits
526(1)
Marketable Securities
527(1)
Inventories
528(2)
Supply Chain Management
529(1)
Accounts Receivable
530(4)
Credit Policy
530(1)
Setting and Implementing the Credit Policy
531(1)
Monitoring Accounts Receivable
532(2)
Accounts Payable (Trade Credit)
534(3)
Bank Loans
537(4)
Promissory Note
537(1)
Line of Credit
538(1)
Revolving Credit Agreement
538(1)
Costs of Bank Loans
539(2)
Commercial Paper
541(1)
Accruals (Accrued Liabilities)
542(1)
Use of Security in Short-Term Financing
542(10)
Tying it all Together
543(5)
Integrated Case Ski Equipment Inc.
548(4)
Web APPENDIX 16A Inventory Management
Web APPENDIX 16B Short-Term Loans and Bank Financing
Financial Planning and Forecasting
552(25)
Forecasting Apple's Future
552(1)
Putting Things in Perspective
553(1)
Strategic Planning
553(2)
The Sales Forecast
555(1)
The AFN Equation
556(4)
Key Determinants of External Funds Requirements
558(1)
Excess Capacity Adjustments
558(2)
Forecasted Financial Statements
560(3)
Initial Forecast: ``Business as Usual''
560(3)
Using Regression to Improve Financial Forecasts
563(2)
Using Individual Ratios in the Forecasting Process
565(12)
Modifying Accounts Receivable
565(1)
Modifying Inventories
566(1)
Other ``Special Studies''
566(1)
Tying it all Together
567(5)
Integrated Case New World Chemicals Inc.
572(5)
Web APPENDIX 17A Forecasting Financial Requirements When Financial Ratios Change
Part 7 Special Topics in Financial Management
577
Derivatives and Risk Management
578(38)
Using Derivatives to Manage Risk
578(1)
Putting Things in Perspective
579(1)
Reasons to Manage Risk
579(3)
Background on Derivatives
582(2)
Global Perspectives: Barings and Sumitomo Suffer Large Losses in the Derivatives Market
583(1)
Options
584(5)
Option Types and Markets
584(2)
Factors That Affect the Value of a Call Option
586(1)
Exercise Value versus Option Price
586(3)
Introduction to Option Pricing Models
589(3)
Expensing Executive Stock Options
590(2)
The Black-Scholes Option Pricing Model (OPM)
592(4)
Opm Assumptions and Equations
592(2)
Opm Illustration
594(2)
Forward and Futures Contracts
596(4)
Other Types of Derivatives
600(3)
Swaps
600(1)
Structured Notes
601(1)
Inverse Floaters
602(1)
Credit Instruments Create New Opportunities and Risks
603(1)
Risk Management
603(4)
An Approach to Risk Management
605(1)
Microsoft's Goal: Manage Every Risk!
606(1)
Using Derivatives to Reduce Risks
607(9)
Security Price Exposure
607(3)
Commodity Price Exposure
610(1)
The Use and Misuse of Derivatives
610(1)
Tying it all Together
611(2)
Integrated Case Tropical Sweets Inc.
613(2)
Multinational Financial Management
615(1)
U.S. Firms Look Overseas to Enhance Shareholder Value
615(1)
Putting Things in Perspective
616(1)
Multinational or Global Corporations
616(32)
Multinational versus Domestic Financial Management
619(2)
The International Monetary System
621(2)
International Monetary Terminology
621(1)
Current Monetary Arrangements
622(1)
Foreign Exchange Rate Quotations
623(3)
Cross Rates
624(1)
Interbank Foreign Currency Quotations
625(1)
Trading in Foreign Exchange
626(1)
Spot Rates and Forward Rates
626(1)
Interest Rate Parity
627(2)
Purchasing Power Parity
629(1)
Inflation, Interest Rates, and Exchange Rates
630(1)
International Money and Capital Markets
631(5)
International Credit Markets
631(1)
Hungry for a Big Mac? Go to China!
632(2)
Stock Market Indices Around the World
634(1)
International Stock Markets
635(1)
International Capital Budgeting
636(2)
International Capital Structures
638(1)
Multinational Working Capital Management
639(9)
Cash Management
639(1)
Credit Management
640(1)
Inventory Management
641(1)
Tying it all Together
642(4)
Integrated Case Citrus Products Inc.
646(2)
Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles
648(35)
Taking a Wild Ride with Amazon's Convertible Debt
648(1)
Putting Things in Perspective
649(1)
Preferred Stock
650(3)
Basic Features
650(2)
Other Types of Preferred Stock
652(1)
Advantages and Disadvantages of Preferred Stock
652(1)
Leasing
653(8)
Types of Leases
653(1)
Funny-Named Preferred-Like Securities
654(2)
Financial Statement Effects
656(1)
Evaluation by the Lessee
657(3)
Factors That Affect Leasing Decisions
660(1)
Warrants
661(6)
Initial Market Price of a Bond with Warrants
662(1)
Use of Warrants in Financing
663(1)
Wealth Effects and Dilution Due to Warrants
664(2)
The Component Cost of Bonds with Warrants
666(1)
Problems with Warrant Issues
666(1)
Convertibles
667(6)
Conversion Ratio and Conversion Price
667(1)
The Component Cost of Convertibles
668(4)
Use of Convertibles in Financing
672(1)
Convertibles and Conflicts of Interest
673(1)
A Final Comparison of Warrants and Convertibles
673(1)
Reporting Earnings When Warrants or Convertibles Are Outstanding
674(9)
Tying it all Together
675(6)
Integrated Case Fish & Chips. Inc., Part I
681(1)
Fish & Chips, Inc., Part II
681(2)
Mergers and Acquisitions
683
Procter & Gamble Acquires Gillette
683(1)
Putting Things in Perspective
684(1)
Rationale for Mergers
685(2)
Synergy
685(1)
Tax Considerations
685(1)
Purchase of Assets below Their Replacement Cost
686(1)
Diversification
686(1)
Managers' Personal Incentives
686(1)
Breakup Value
687(1)
Types of Mergers
687(1)
Level of Merger Activity
687(2)
Hostile versus Friendly Takeovers
689(1)
Merger Regulation
690(1)
Merger Analysis
691(8)
Valuing the Target Firm
692(3)
Setting the Bid Price
695(2)
More Than Just Financial Statements
697(1)
Post-Merger Control
698(1)
Financial Reporting for Mergers
699(3)
Purchase Accounting
699(1)
Income Statement Effects
700(1)
Tempest in a Teapot?
701(1)
The Role of Investment Bankers
702(2)
Arranging Mergers
702(1)
Developing Defensive Tactics
702(1)
Establishing a Fair Value
703(1)
Financing Mergers
703(1)
Arbitrage Operations
704(1)
Do Mergers Create Value? The Empirical Evidence
704(2)
The Track Record of Recent Large Mergers
705(1)
Corporate Alliances
706(1)
Leveraged Buyouts
706(1)
Divestitures
707
Types of Divestitures
707(1)
Divestiture Illustrations
707(1)
Global Perspectives: Governments Are Divesting State-Owned Businesses to Spur Economic Efficiency
708(2)
Tying it all Together
710(3)
Integrated Case Smitty's Home Repair Company
713
Web APPENDIX 21A Holding Companies
Appendixes
Appendix A Solutions to Self-Test Questions and Problems
1(1)
Appendix B Answers to Selected End-of-Chapter Problems
27(1)
Appendix C Selected Equations and Data
30(1)
Web APPENDIX C Selected Equations and Data
Index 1(1)


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