Acknowledgements                                   xix
Preface                                            xxi
  Part 1 Introduction to Financial Management
    The Role of Financial Management               1  (16)
      Objectives                                   1  (1)
      Introduction                                 2  (1)
      What Is Financial Management?                2  (1)
      The Goal of the Firm                         3  (5)
      Corporate Governance                         8  (1)
      Organization of the Financial Management     8  (2)
      Function
      Organization of the Book                     10 (3)
      Key Learning Points                          13 (1)
      Questions                                    14 (1)
      Selected References                          14 (3)
    The Business, Tax, and Financial               17 (24)
    Environments
      Objectives                                   17 (1)
      The Business Environment                     18 (2)
      The Tax Environment                          20 (7)
      The Financial Environment                    27 (8)
      Key Learning Points                          35 (1)
      Questions                                    36 (1)
      Self-Correction Problems                     37 (1)
      Problems                                     37 (1)
      Solutions to Self-Correction Problems        38 (1)
      Selected References                          39 (2)
  Part 2 Valuation
    The Time Value of Money                        41 (32)
      Objectives                                   41 (1)
      The Interest Rate                            42 (1)
      Simple Interest                              43 (1)
      Compound Interest                            43 (16)
      Compounding More Than Once a Year            59 (3)
      Amortizing a Loan                            62 (1)
      Summary Table of Key Compound Interest       63 (1)
      Formulas
      Key Learning Points                          63 (1)
      Questions                                    64 (1)
      Self-Correction Problems                     64 (1)
      Problems                                     65 (4)
      Solutions to Self-Correction Problems        69 (2)
      Selected References                          71 (2)
    The Valuation of Long-Term Securities          73 (24)
      Objectives                                   73 (1)
      Distinctions Among Valuation Concepts        74 (1)
      Bond Valuation                               75 (3)
      Preferred Stock Valuation                    78 (1)
      Common Stock Valuation                       79 (4)
      Rates of Return (or Yields)                  83 (5)
      Summary Table of Key Present Value           88 (1)
      Formulas for Valuing Long-Term Securities
      Key Learning Points                          88 (1)
      Questions                                    89 (1)
      Self-Correction Problems                     90 (1)
      Problems                                     91 (2)
      Solutions to Self-Correction Problems        93 (2)
      Selected References                          95 (2)
    Risk and Return                                97 (30)
      Objectives                                   97 (1)
      Defining Risk and Return                     98 (1)
      Using Probability Distributions to           99 (2)
      Measure Risk
      Attitudes Toward Risk                        101(2)
      Risk and Return in a Portfolio Context       103(1)
      Diversification                              104(2)
      The Capital-Asset Pricing Model (CAPM)       106(8)
      Efficient Financial Markets                  114(2)
      Key Learning Points                          116(1)
      Appendix A: Measuring Portfolio Risk         117(2)
      Appendix B: Arbitrage Pricing Theory         119(2)
      Questions                                    121(1)
      Self-Correction Problems                     122(1)
      Problems                                     122(3)
      Solutions to Self-Correction Problems        125(1)
      Selected References                          126(1)
  Part 3 Tools of Financial Analysis and
  Planning
    Financial Statement Analysis                   127(42)
      Objectives                                   127(1)
      Financial Statements                         128(6)
      A Possible Framework for Analysis            134(4)
      Balance Sheet Ratios                         138(3)
      Income Statement and Income                  141(11)
      Statement/Balance Sheet Ratios
      Trend Analysis                               152(1)
      Common-Size and Index Analysis               153(3)
      Key Learning Points                          156(1)
      Summary of Key Ratios                        156(2)
      Appendix: Deferred Taxes and Financial       158(1)
      Analysis
      Questions                                    159(1)
      Self-Correction Problems                     160(1)
      Problems                                     161(4)
      Solutions to Self-Correction Problems        165(2)
      Selected References                          167(2)
    Funds Analysis, Cash-Flow Analysis, and        169(36)
    Financial Planning
      Objectives                                   169(1)
      Flow of Funds (Sources and Uses) Statement   170(6)
      Accounting Statement of Cash Flows           176(4)
      Cash-Flow Forecasting                        180(4)
      Range of Cash-Flow Estimates                 184(2)
      Forecasting Financial Statements             186(4)
      Key Learning Points                          190(1)
      Appendix: Sustainable Growth Modeling        190(4)
      Questions                                    194(1)
      Self-Correction Problems                     195(2)
      Problems                                     197(3)
      Solutions to Self-Correction Problems        200(3)
      Selected References                          203(2)
  Part 4 Working Capital Management
    Overview of Working Capital Management         205(16)
      Objectives                                   205(1)
      Introduction                                 206(2)
      Working Capital Issues                       208(2)
      Financing Current Assets: Short-Term and     210(5)
      Long-Term Mix
      Combining Liability Structure and Current    215(1)
      Asset Decisions
      Key Learning Points                          216(1)
      Questions                                    216(1)
      Self-Correction Problem                      217(1)
      Problems                                     217(1)
      Solutions to Self-Correction Problem         218(1)
      Selected References                          219(2)
    Cash and Marketable Securities Management      221(28)
      Objectives                                   221(1)
      Motives for Holding Cash                     222(1)
      Speeding Up Cash Receipts                    223(5)
      S-l-o-w-i-n-g D-o-w-n Cash Payouts           228(3)
      Electronic Commerce                          231(2)
      Outsourcing                                  233(1)
      Cash Balances to Maintain                    234(1)
      Investment in Marketable Securities          235(9)
      Key Learning Points                          244(1)
      Questions                                    245(1)
      Self-Correction Problems                     245(1)
      Problems                                     246(1)
      Solutions to Self-Correction Problems        247(1)
      Selected References                          248(1)
    Accounts Receivable and Inventory Management   249(32)
      Objectives                                   249(1)
      Credit and Collection Policies               250(8)
      Analyzing the Credit Applicant               258(5)
      Inventory Management and Control             263(10)
      Key Learning Points                          273(1)
      Questions                                    274(1)
      Self-Correction Problems                     274(1)
      Problems                                     275(3)
      Solutions to Self-Correction Problems        278(1)
      Selected References                          279(2)
    Short-Term Financing                           281(26)
      Objectives                                   281(1)
      Spontaneous Financing                        282(5)
      Negotiated Financing                         287(11)
      Factoring Accounts Receivable                298(2)
      Composition of Short-Term Financing          300(1)
      Key Learning Points                          301(1)
      Questions                                    302(1)
      Self-Correction Problems                     302(1)
      Problems                                     303(2)
      Solutions to Self-Correction Problems        305(1)
      Selected References                          306(1)
  Part 5 Investment in Capital Assets
    Capital Budgeting and Estimating Cash Flows    307(16)
      Objectives                                   307(1)
      The Capital Budgeting Process: An Overview   308(1)
      Generating Investment Project Proposals      308(1)
      Estimating Project ``After-Tax               309(9)
      Incremental Operating Cash Flows''
      Key Learning Points                          318(1)
      Questions                                    318(1)
      Self-Correction Problems                     319(1)
      Problems                                     319(2)
      Solutions to Self-Correction Problems        321(1)
      Selected References                          322(1)
    Capital Budgeting Techniques                   323(30)
      Objectives                                   323(1)
      Project Evaluation and Selection:            324(6)
      Alternative Methods
      Potential Difficulties                       330(10)
      Project Monitoring: Progress Reviews and     340(1)
      Post-Completion Audits
      Key Learning Points                          340(1)
      Appendix A: Multiple Internal Rates of       341(2)
      Return
      Appendix B: Replacement Chain Analysis       343(2)
      Questions                                    345(1)
      Self-Correction Problems                     346(1)
      Problems                                     347(2)
      Solutions to Self-Correction Problems        349(1)
      Selected References                          350(3)
    Risk and Managerial (Real) Options in          353(28)
    Capital Budgeting
      Objectives                                   353(1)
      The Problem of Project Risk                  354(3)
      Total Project Risk                           357(7)
      Contribution to Total Firm Risk:             364(4)
      Firm-Portfolio Approach
      Managerial (Real) Options                    368(5)
      Key Learning Points                          373(1)
      Questions                                    373(1)
      Self-Correction Problems                     374(1)
      Problems                                     375(2)
      Solutions to Self-Correction Problems        377(2)
      Selected References                          379(2)
  Part 6 The Cost of Capital, Capital
  Structure, and Dividend Policy
    Required Returns and the Cost of Capital       381(38)
      Objectives                                   381(1)
      Creation of Value                            382(1)
      Overall Cost of Capital of the Firm          383(13)
      The CAPM: Project-Specific and               396(5)
      Group-Specific Required Rates of Return
      Evaluation of Projects on the Basis of       401(5)
      Their Total Risk
      Key Learning Points                          406(1)
      Appendix A: Adjusting the Beta for           407(1)
      Financial Leverage
      Appendix B: Adjusted Present Value           408(2)
      Questions                                    410(1)
      Self-Correction Problems                     411(1)
      Problems                                     412(3)
      Solutions to Self-Correction Problems        415(2)
      Selected References                          417(2)
    Operating and Financial Leverage               419(32)
      Objectives                                   419(1)
      Operating Leverage                           420(7)
      Financial Leverage                           427(8)
      Total Leverage                               435(1)
      Cash-Flow Ability to Service Debt            436(3)
      Other Methods of Analysis                    439(1)
      Combination of Methods                       440(1)
      Key Learning Points                          441(1)
      Questions                                    442(1)
      Self-Correction Problems                     443(1)
      Problems                                     444(2)
      Solutions to Self-Correction Problems        446(3)
      Selected References                          449(2)
    Capital Structure Determination                451(24)
      Objectives                                   451(1)
      A Conceptual Look                            452(4)
      The Total-Value Principle                    456(2)
      Presence of Market Imperfections and         458(3)
      Incentive Issues
      The Effect of Taxes                          461(2)
      Taxes and Market Imperfections Combined      463(2)
      Financial Signaling                          465(1)
      Timing and Financial Flexibility             465(1)
      Financing Checklist                          466(1)
      Key Learning Points                          467(1)
      Questions                                    468(1)
      Self-Correction Problems                     468(1)
      Problems                                     469(2)
      Solutions to Self-Correction Problems        471(2)
      Selected References                          473(2)
    Dividend Policy                                475(30)
      Objectives                                   475(1)
      Passive versus Active Dividend Policies      476(5)
      Factors Influencing Dividend Policy          481(3)
      Dividend Stability                           484(2)
      Stock Dividends and Stock Splits             486(5)
      Stock Repurchase                             491(4)
      Administrative Considerations                495(1)
      Key Learning Points                          496(1)
      Questions                                    497(1)
      Self-Correction Problems                     498(1)
      Problems                                     499(2)
      Solutions to Self-Correction Problems        501(1)
      Selected References                          502(3)
  Part 7 Intermediate and Long-Term Financing
    The Capital Market                             505(22)
      Objectives                                   505(1)
      Deja Vu All Over Again                       506(1)
      Public Issue                                 507(2)
      Privileged Subscription                      509(3)
      Regulation of Security Offerings             512(4)
      Private Placement                            516(3)
      Initial Financing                            519(1)
      Signaling Effects                            520(2)
      The Secondary Market                         522(1)
      Key Learning Points                          522(1)
      Questions                                    523(1)
      Self-Correction Problems                     524(1)
      Problems                                     524(1)
      Solutions to Self-Correction Problems        525(1)
      Selected References                          526(1)
    Long-Term Debt, Preferred Stock, and Common    527(26)
    Stock
      Objectives                                   527(1)
      Bonds and Their Features                     528(1)
      Types of Long-Term Debt Instruments          529(3)
      Retirement of Bonds                          532(2)
      Preferred Stock and Its Features             534(4)
      Common Stock and Its Features                538(1)
      Rights of Common Shareholders                539(3)
      Dual-Class Common Stock                      542(1)
      Key Learning Points                          543(1)
      Appendix: Refunding a Bond Issue             544(2)
      Questions                                    546(1)
      Self-Correction Problems                     547(1)
      Problems                                     548(2)
      Solutions to Self-Correction Problems        550(1)
      Selected References                          551(2)
    Term Loans and Leases                          553(24)
      Objectives                                   553(1)
      Term Loans                                   554(2)
      Provisions of Loan Agreements                556(2)
      Equipment Financing                          558(1)
      Lease Financing                              559(3)
      Evaluating Lease Financing in Relation to    562(5)
      Debt Financing
      Key Learning Points                          567(1)
      Appendix: Accounting Treatment of Leases     567(3)
      Questions                                    570(1)
      Self-Correction Problems                     571(1)
      Problems                                     572(1)
      Solutions to Self-Correction Problems        573(2)
      Selected References                          575(2)
  Part 8 Special Areas of Financial Management
    Convertibles, Exchangeables, and Warrants      577(26)
      Objectives                                   577(1)
      Convertible Securities                       578(3)
      Value of Convertible Securities              581(3)
      Exchangeable Bonds                           584(1)
      Warrants                                     585(4)
      Key Learning Points                          589(1)
      Appendix: Option Pricing                     589(6)
      Questions                                    595(1)
      Self-Correction Problems                     596(1)
      Problems                                     597(2)
      Solutions to Self-Correction Problems        599(1)
      Selected References                          600(3)
    Mergers and Other Forms of Corporate           603(44)
    Restructuring
      Objectives                                   603(1)
      Sources of Value                             604(4)
      Strategic Acquisitions Involving Common      608(7)
      Stock
      Acquisitions and Capital Budgeting           615(2)
      Closing the Deal                             617(3)
      Takeovers, Tender Offers, and Defenses       620(2)
      Strategic Alliances                          622(1)
      Divestiture                                  623(3)
      Ownership Restructuring                      626(1)
      Leveraged Buyouts                            627(2)
      Key Learning Points                          629(1)
      Appendix: Remedies for a Failing Company     630(5)
      Questions                                    635(1)
      Self-Correction Problems                     636(2)
      Problems                                     638(3)
      Solutions to Self-Correction Problems        641(2)
      Selected References                          643(4)
    International Financial Management             647(32)
      Objectives                                   647(1)
      Some Background                              648(4)
      Types of Exchange-Rate Risk Exposure         652(4)
      Management of Exchange-Rate Risk Exposure    656(12)
      Structuring International Trade              668(3)
      Transactions
      Key Learning Points                          671(1)
      Questions                                    672(1)
      Self-Correction Problems                     673(1)
      Problems                                     674(2)
      Solutions to Self-Correction Problems        676(1)
      Selected References                          677(2)
  Appendix                                         679(10)
      Table I: Future value interest factor        680(2)
      Table II: Present value interest factor      682(2)
      Table III: Future value interest factor      684(2)
      of an (ordinary) annuity
      Table IV: Present value interest factor      686(2)
      of an (ordinary) annuity
      Table V: Area of normal distribution that    688(1)
      is Z standard deviations to the left or
      right of the mean
Glossary                                           689(16)
Commonly Used Symbols                              705(2)
Index                                              707