Description
Financial Management Concepts and Applications Edition 1 by Stephen Foerster EBOOK PDF Instant Download
Table of Contents
Financial Management Concepts and Applications
Financial Management Concepts and Applications
About the Author
Brief Content
Contents
Preface
Key Features
How This Book Is Organized
Instructor Resources
For Students
Part 1 Assessing and Managing Performance
1 Overview of Financial Management
Learning Objectives
1.1 Financial Management and the Cash Flow Cycle
CASE STUDY Advanced Micro Devices Inc.’s Cash Crunch
1.2 The Role of Financial Managers
In-Depth Maximizing Shareholder Value: An Ethical Responsibility?
1.3 A Nonfinancial Perspective of Financial Management
In the News Walmart’s Financial Challenges
1.4 Financial Management’s Relationship with Accounting and Other Disciplines
1.5 Types of Firms
1.6 A Financial Management Framework
1.7 Relevance for Managers
Summary
Additional Readings and Information
Problems
2 Sizing-Up a Business: A Nonfinancial Perspective
Learning Objectives
In-Depth Gathering Information for a Size-Up
2.1 Sizing-Up the Overall Economy
2.1.1 GDP Components
2.1.2 Sector-Related Fluctuations
Case Study Sector Performance and Business Cycles: Duke Energy Corporation and Tiffany & Co.
2.1.3 Inflation and Interest Rates
2.1.4 Capital Markets
2.1.5 Economic Size-Up Checklist
2.2 Sizing-Up the Industry
2.2.1 Industry Life Cycles
2.2.2 The Competitive Environment
2.2.3 Opportunities and Risks
2.2.4 Industry Size-Up Checklist
2.3 Sizing-Up Operations Management and Supply Risk
2.4 Sizing-Up Marketing Management and Demand Risk
2.5 Sizing-Up Human Resource Management and Strategy
2.6 Sizing-Up Home Depot: An Example
2.7 Relevance for Managers
Summary
Additional Readings and Information
Problems
3 Understanding Financial Statements
Learning Objectives
3.1 Understanding Balance Sheets
3.1.1 Understanding Assets
3.1.2 Understanding Liabilities
3.1.3 Understanding Equity
In-Depth Book Value of Equity versus Market Value of Equity
3.2 Understanding Income Statements
3.2.1 Understanding Revenues, Costs, Expenses, and Profits
In-Depth EBIT versus EBITDA
3.2.2 Connecting a Firm’s Income Statement and Balance Sheet
3.3 Understanding Cash Flow Statements
3.3.1 Cash Flows Related to Operating Activities
3.3.2 Cash Flows from Investing Activities
3.3.3 Cash Flows from Financing Activities
In-Depth U.S. versus International Accounting and Financial Statement Presentation
3.4 Relevance for Managers
Summary
Additional Readings and Information
Problems
4 Measuring Financial Performance
Learning Objectives
4.1 Performance Measures
4.1.1 Return on Equity
Case Study ROE Drivers across Industries: Tiffany and Kroger
4.1.2 Profitability Measures
4.1.3 Resource Management Measures
4.1.4 Liquidity Measures
4.1.5 Leverage Measures
4.1.6 Application: Home Depot
4.2 Reading Annual Reports
4.3 Relevance for Managers
Summary
Additional Readings and Information
Problems
5 Managing Day-to-Day Cash Flow
Learning Objectives
5.1 Cash Flow Cycles
5.2 Working Capital Management
5.2.1 Managing Inventory
In-Depth Inventory Management Systems
5.2.2 Managing Accounts Receivable
In-Depth Aging Schedules and Bad Debt
5.2.3 Managing Accounts Payable
5.2.4 Application: Home Depot
In-Depth The Cost of Foregoing Discounts on Payables
5.2.4.1 Orange Computers and Little Orange Computers?
5.2.4.2 Home Depot?
In-Depth Working Capital Management Ratios across Industries
5.3 Short-Term Financing
5.3.1 Bank Loans
5.3.2 Commercial Paper
5.3.4 Banker’s Acceptance
Case Study Commercial Paper and the 2007–2009 Financial Crisis
5.4 Relevance for Managers
Summary
Additional Readings and Information
Problems
Part 2 Assessing Future Financial Needs
6 Projecting Financial Requirements and Managing Growth
Learning Objectives
6.1 Generating Pro Forma Income Statements
6.1.1 Establishing Cost of Goods Sold and Gross Profit
6.1.2 Establishing Expenses
6.1.3 Establishing Earnings
6.2 Generating Pro Forma Balance Sheets
6.2.1 Establishing Assets
6.2.2 Establishing Liabilities and Equity
6.3 Generating Pro Forma Cash Budgets
6.3.1 Establishing Cash Inflows
6.3.2 Establishing Cash Outflows
6.3.3 Establishing Net Cash Flows
6.4 Performing Sensitivity Analysis
6.4.1 Sales Sensitivity
6.4.2 Interest Rate Sensitivity
6.4.3 Working Capital Sensitivity
6.5 Understanding Sustainable Growth and Managing Growth
Case Study Home Depot’s Pro Forma Statements and Sustainable Growth
6.6 Relevance for Managers
Summary
Additional Readings and Information
Problems
Appendix: Spreadsheet Analysis
7 Time Value of Money Basics and Applications
Learning Objectives
7.1 Exploring Time Value of Money Concepts
7.1.1 Future Values
7.1.2 Present Values
7.1.3 Annuities
7.1.4 Perpetuities
In-Depth Spreadsheet and Financial Calculator Tips
7.2 Applying Time Value of Money Concepts to Financial Securities
7.2.1 Bonds
In-Depth Bond Prices and Yields: Home Depot Inc. Example
7.2.2 Preferred Shares
In-Depth Preferred Share Prices and Bond Yields: Kansas City Railroad
7.2.3 Common Equity
In-Depth Multistage Dividend Discount Model
7.3 Relevance for Managers
Summary
Additional Readings and Information
Problems
8 Making Investment Decisions
Learning Objectives
8.1 Understanding the Decision-Making Process
8.2 Capital Budgeting Techniques
8.2.1 Payback
8.2.1.1 Strengths and Weaknesses of the Payback Method?
8.2.2 Net Present Value
8.2.2.1 Strengths and Weaknesses of the Net Present Value Method?
In-Depth Real Options
8.2.3 Internal Rate of Return
8.2.3.1 Strengths and Weaknesses of the Internal Rate of Return Method?
8.2.3.2 Modified Internal Rate of Return?
8.3 Capital Budgeting Extensions
8.3.1 Profitability Index
8.3.2 Equivalent Annual Cost and Project Lengths
8.3.3 Mutually Exclusive Projects and Capital Rationing
8.4 Relevance for Managers
Summary
Additional Readings and Information
Problems
Part 3 Financing Long-Term Needs
9 Overview of Capital Markets: Long-Term Financing Instruments
Learning Objectives
9.1 Bonds
9.1.1 Changing Bond Yields
9.1.2 Bond Features
In the News The Libor Scandal
9.1.3 Bond Ratings
In-Depth What Credit-Rating Agencies Do
9.2 Preferred Shares
9.3 Common Shares
9.3.1 Historical Returns
9.4 Capital Markets Overview
9.4.1 Private versus Public Markets
9.4.2 Venture Capital and Private Equity
Case Study Private Placement Example—Sesac Inc. and the Music of Bob Dylan and Neil Diamond
9.4.3 Initial Offerings versus Seasoned Issues
In Depth SOX and the Cost of Being a Public Firm
Case Study Google and Facebook IPOs
9.4.4 Organized Exchanges versus Over-the-Counter Markets
9.4.5 Role of Intermediaries
9.5 Market Efficiency
9.5.1 Weak Form
9.5.2 Semistrong Form
9.5.3 Strong Form
9.5.4 U.S. Stock Market Efficiency
9.6 Relevance for Managers
Summary
Additional Readings and Information
Problems
Appendix: Understanding Bond and Stock Investment Information
Bond Information
Stock Information
10 Assessing the Cost of Capital: What Return Investors Require
Learning Objectives
10.1 Understanding the Cost of Capital: An Example
10.2 Understanding the Implications of the Cost of Capital
10.3 Defining Risk
10.4 Estimating the Cost of Debt
10.5 Estimating the Cost of Preferred Shares
10.6 Estimating the Cost of Equity
10.6.1 Dividend Model Approach
10.6.2 Capital Asset Pricing Model
In-Depth Investing in “the Market”
10.6.2.1 Risk-Free Rate?
10.6.2.2 Market Risk Premium?
10.6.2.3 Beta?
10.7 Estimating Component Weights
10.8 Home Depot Application
10.9 Hurdle Rates
10.10 Relevance for Managers
Summary
Additional Readings and Information
Problems
11 Understanding Financing and Payout Decisions
Learning Objectives
11.1 Capital Structure Overview
11.2 Understanding the Modigliani-Miller Argument: Why Capital Structure Does Not Matter
11.3 Relaxing the Assumptions: Why Capital Structure Does Matter
11.3.1 Understanding the Impact of Corporate Taxes
11.3.2 Understanding the Impact of Financial Distress
In the News Largest U.S. Bankruptcy
11.3.3 Combining Corporate Taxes and Financial Distress Costs
11.3.4 Impact of Asymmetric Information
11.4 Understanding Payout Policies
11.4.1 Paying Dividends
11.4.2 Repurchasing Shares
11.4.3 Do Dividend Policies Matter?
11.5 Relevance for Managers
Summary
Additional Readings and Information
Problems
Appendix: Why Dividend Policy Doesn’t Matter: Example
12 Designing an Optimal Capital Structure
Learning Objectives
12.1 Factors Affecting Financing Decisions: The FIRST Approach
12.1.1 Maximizing Flexibility
Case Study Ford Motor Company and Financial Flexibility Prior to the Financial Crisis
12.1.2 Impact on EPS: Minimizing Cost
12.1.2.1 A Simple Valuation Model
12.1.2.2 Earnings before Interest and Taxes Breakeven: What Leverage Really Means
12.1.2.3 Does Issuing Equity Dilute the Value of Existing Shares?
12.1.3 Minimizing Risk
12.1.4 Maintaining Shareholder Control
Case Study Maintaining Control: Google Inc. and Dual Class Shares
12.1.5 Optimal Timing
12.2 Tradeoff Assessment: Evaluating the FIRST Criteria
In-Depth Optimal Amount of Debt at the Firm Level: Six Flags Inc. Example
12.2.1 Example: Optimal Capital Structure and Minimizing the Cost of Capital
Case Study Changing Capital Structure: The Home Depot Example
In-Depth The Cost of Equity, Levered Betas, and the Target Capital Structure
12.3 Relevance for Managers
Summary
Additional Readings and Information
Problems
Part 4 Creating Value
13 Measuring and Creating Value
Learning Objectives
13.1 An Overview of Measuring and Creating Value
13.2 Measuring Value: The Book Value Plus Adjustments Method
13.2.1 Pros and Cons of the Book Value of Equity Plus Adjustments Method
13.3 Measuring Value: The Discounted Cash Flow Analysis Method
13.3.1 Estimating Free Cash Flows
In-Depth Why Do We Add Back Noncash Items?
13.3.2 Estimating the Cost of Capital
13.3.3 Estimating the Present Value of Free Cash Flows
13.3.4 Estimating the Terminal Value
In-Depth The Most Common DCF Estimation Mistakes
13.3.5 Estimating the Value of Equity
13.3.6 Pros and Cons of the Free Cash Flow to the Firm Approach
13.4 Measuring Value: Relative Valuations and Comparable Analysis
13.4.1 The Price-Earnings Method
13.4.2 Pros and Cons of the Price-Earnings Approach
In-Depth The Price-Earnings Model and the Constant Growth Dividend Discount Model
13.4.3 The Enterprise Value-to-EBITDA Method
13.4.4 Pros and Cons of the EV/EBITDA Approach
In-Depth Comparing P/B, P/E, and EV/EBITDA across Industries
13.5 Creating Value and Value-Based Management
13.6 Valuing Mergers and Acquisitions
13.6.1 Valuing Comparable M&A Transactions
13.7 Relevance for Managers
Summary
Additional Readings and Information
Problems
14 Comprehensive Case Study: Wal-Mart Stores, Inc.
Learning Objectives
14.1 Sizing-Up Walmart
14.1.1 Analyzing the Economy
14.1.2 Analyzing the Industry
14.1.3 Analyzing Walmart’s Strengths and Weaknesses in Operations, Marketing, Management, and Strategy
14.1.3.1 Analyzing Walmart’s Operations?
14.1.3.2 Analyzing Walmart’s Marketing?
14.1.3.3 Analyzing Walmart’s Management and Strategy?
14.1.4 Analyzing Walmart’s Financial Health
In-Depth Target Corporation: ROIC
In-Depth Target Corporation: ROE
14.2 Projecting Walmart’s Future Performance
14.2.1 Projecting Walmart’s Income Statement
14.2.2 Projecting Walmart’s Balance Sheet
14.2.3 Examining Alternate Scenarios
14.3 Assessing Walmart’s Long-Term Investing and Financing
14.3.1 Assessing Walmart’s Investments
14.3.2 Assessing Walmart’s Capital Raising and the Cost of Capital
In-Depth Target Corporation: Cost of Capital
14.4 Valuing Walmart
14.4.1 Measuring Walmart’s Economic Value Added
In-Depth Target Corporation: EVA
14.4.2 Estimating Walmart’s Intrinsic Value: The DCF Approach
14.4.3 Estimating Walmart’s Intrinsic Value: Comparable Analysis
In-Depth Target Corporation: EV/EBITDA Analysis
14.4.4 Creating Value and an Overall Assessment of Walmart
14.5 Relevance for Managers and Final Comments
Additional Readings and Information
Problems
Glossary
Index
