The Basics of Finance An Introduction to Financial Markets, Business Finance, and Portfolio Management

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  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2010-09-21
  • Publisher: Wiley
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An introductory guide to the world of financeThe Basics of Finance is an accessible book for those who want to gain a better understanding of this field, but lack a strong business background. It covers essential concepts, tools, methods, and strategies in finance without delving too far into theory.Written by the experienced author team of Frank Fabozzi and Pamela Peterson Drake, this reliable resource discusses everything from financial instruments and markets to portfolio management techniques, understanding and analyzing financial statements, and different types of corporate financial strategy, planning, and policy. Explores, in a basic way, topics such as cash flow analysis, asset valuation, capital budgeting, and derivatives Provides a solid foundation in the field of finance, which you can quickly build upon Explains concepts in various areas of finance without getting too complicatedThe Basics of Finance offers essential guidance on financial markets and institutions, corporate finance, portfolio management, risk management, and much more. If you're looking to learn more about finance, this is the best place to start.

Author Biography

PAMELA PETERSON DRAKE, PhD, CFA, is the J. Gray Ferguson Professor of Finance and Department Head of Finance and Business Law at James Madison University. She received her PhD in finance from the University of North Carolina at Chapel Hill and her BS in accountancy from Miami University. Professor Drake previously taught at Florida State University and Florida Atlantic University.

Frank J. Fabozzi, PhD, CFA, CPA, is Professor in the Practice of Finance and Becton Fellow at the Yale School of Management and Editor of the Journal of Portfolio Management. Fabozzi earned a doctorate in economics from the City University of New York. He is an Affiliated Professor at the University of Karlsruhe's Institute of Statistics, Econometrics, and Mathematical Finance and is on the Advisory Council for the Department of Operations Research and Financial Engineering at Princeton University.

Table of Contents

What is Finance?
Capital Markets & Capital Market Theory
Financial Management
Investment management
Organization of this book
The Bottom Line
The Financial System
Financial Instruments, Markets, and Intermediaries
The financial system
The Role of Financial Markets
The role of financial intermediaries
Types of financial markets
The Bottom Line
The Financial System's Cast of Characters
Domestic nonfinancial sectors
Nonfinancial businesses
Domestic financial sectors
The foreign sector
The Bottom Line
Financial Management
Financial Statements
Accounting principles: What are they?
The basic financial statements
How are the statements related?
Why bother about the footnotes?
Accounting flexibility
U.S. accounting v. outside of the U.S
The Bottom Line
Solutions to Try it! Problems
Business Finance
Forms of business enterprise
The objective of financial management
The Bottom Line
Solutions to Try it! Problems
Financial Strategy and Financial Planning
Strategy and value
The budgeting process
Performance evaluation
Strategy and value creation
The Bottom Line
Dividend and Dividend Policies
Stock distributions
Dividend policy
Stock repurchases
The Bottom Line
Solutions to Try it! Problems
The Corporate Financing Decision
Debt v. equity
Financial leverage and risk
Financial distress
The cost of capital
Optimal capital structure: Theory and practice
The Bottom Line
Solutions to Try It! Problems
Investment Management
Setting investment objectives
Establishing an investment policy
Constructing and monitoring a portfolio
Measuring and evaluating performance
The Bottom Line
Solutions to Try it! Problems
Valuation and Analysis Tools
Time Value of Money
Why the time value of money?
Calculating the future value
Calculating a present value
Determining the unknown interest rate
The time value of a series of cash flows
Loan amortization
Interest rates and yields
The Bottom Line
Solutions to Try it! Problems
Financial Ratio Analysis
Classifying financial ratios
Profitability ratios
Activity ratios
Financial leverage
Return on investment
The Du Pont system
Common-size analysis
Using financial ratio analysis
The Bottom Line
Solutions to Try it! Problems
Cash Flow Analysis
Difficulties with measuring Cash Flow
Free cash flow
Usefulness of cash flows analysis
Ratio analysis
The Bottom Line
Solutions to Try it! Problems
Capital Budgeting
Investment decisions and owners' wealth
The capital budgeting process
Determining cash flows from investments
Capital budgeting techniques
The Bottom Line
Solutions to Try it! Problems
The World of Derivatives
Futures and forward contracts
The Bottom Line
Appendix: Black-Scholes option pricing model
Solutions to Try it! Problems
Financial Risk Management
The definition of risk
Enterprise risk management
Managing risks
The Bottom Line
The Theory of Portfolio Selection
Some basic concepts
Estimating a portfolio's expected return
Measuring portfolio risk
Portfolio diversification
Choosing a portfolio of risky assets
Behavioral finance and portfolio theory
The Bottom Line
Solutions to Try it! Problems
Asset Pricing Theory: The Capital Asset Pricing Model
Characteristics of an asset pricing model
Overview of the capital asset pricing model
The Bottom Line
Solutions to Try it! Problems
The Structure of Interest Rates
The base interest rate
The term structure of interest rates
Term structure of interest rates theories
Swap rate yield curve
The Bottom Line
Solutions to Try it! Problems
Valuing Common Stock
Discounted cash flow models
Relative valuation methods
The Bottom Line
Solutions to Try it! Problems
Valuing Bonds
Valuing a bond
Conventional yield measures
Valuing bonds that have embedded options
The Bottom Line
Solutions to Try it! Problems
Appendix: Solutions to End of Chapter Questions and Problems
About the Authors
Table of Contents provided by Publisher. All Rights Reserved.

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