Financial Management: Principles and Applications, Global Edition, 14th Edition
- Length: 272 pages
- Edition: 14
- Language: English
- Publisher: Pearson
- Publication Date: 2020-09-14
- ISBN-10: 1292349824
- ISBN-13: 9781292349824
- Sales Rank: #0 (See Top 100 Books)
For undergraduate courses in corporate finance and financial management.
Develop and begin to apply financial principles
Students often struggle to see how financial concepts relate to their personal lives and prospective careers Financial Management: Principles and Applications gives students a big picture perspective of finance and how it is important in their personal and professional lives. Utilising five key principles, the 14th Global Edition provides an approachable introduction to financial decision-making, weaving in real-world issues to demonstrate the practical applications of critical financial concepts.
Cover Half Title The Pearson Series in Finance Title Page Copyright Dedication Brief Contents Contents Preface Part 1: Introduction to Financial Management Chapter 1: Getting Started—Principles of Finance Principle 1: Money Has a Time Value Principle 2: There Is a Risk-Return Tradeoff Principle 3: Cash Flows Are the Source of Value Principle 4: Market Prices Reflect Information Principle 5: Individuals Respond to Incentives 1.1 Finance: An Overview What Is Finance Why Study Finance 1.2 Types of Business Organizations Sole Proprietorship Partnership Corporation Not for Profit Organization Co-operative How Does Finance Fit into the Firm’s Organizational Structure 1.3 The Goal of the Financial Manager Maximizing Shareholder Wealth Ethical Considerations in Corporate Finance Regulation Aimed at Making the Goal of the Firm Work: The Sarbanes-Oxley Act 1.4 The Five Basic Principles of Finance Principle 1: Money Has a Time Value Principle 2: There Is a Risk-Return Tradeoff Principle 3: Cash Flows Are the Source of Value Principle 4: Market Prices Reflect Information Principle 5: Individuals Respond to Incentives Chapter Summaries Study Questions Chapter 2: Firms and the Financial Markets Principle 2: There Is a Risk-Return Tradeoff Principle 4: Market Prices Reflect Information Principle 5: Individuals Respond to Incentives 2.1 The Basic Structure of Financial Markets 2.2 The Financial Marketplace: Financial Institutions Commercial Banks: Everyone’s Financial Marketplace Nonbank Financial Intermediaries Finance for Life: Planning for Retirement 2.3 The Financial Marketplace: Securities Markets How Securities Markets Bring Corporations and Investors Together Types of Securities Finance in a Flat World: Where’s the Money Around the World Chapter Summaries Study Questions Chapter 3: Understanding Financial Statements Principle 1: Money Has a Time Value Principle 3: Cash Flows Are the Source of Value Principle 4: Market Prices Reflect Information Principle 5: Individuals Respond to Incentives 3.1 An Overview of the Firm’s Financial Statements Basic Financial Statements Why Study Financial Statements What Are the Accounting Principles Used to Prepare Financial Statements 3.2 The Income Statement Income Statement of H. J. Boswell, Inc Connecting the Income Statement and Balance Sheet Interpreting Firm Profitability Using the Income Statement GAAP and Earnings Management 3.3 Corporate Taxes Computing Taxable Income Federal Income Tax Rates for Corporate Income Marginal and Average Tax Rates Dividend Exclusion for Corporate Stockholders 3.4 The Balance Sheet The Balance Sheet of H. J. Boswell, Inc Firm Liquidity and Net Working Capital Debt and Equity Financing Book Values, Historical Costs, and Market Values Finance for Life: Preparing a Balance Sheet and an Income Statement for a Business 3.5 The Cash Flow Statement Sources and Uses of Cash H. J. Boswell’s Cash Flow Statement Finance in a Flat World: GAAP vs. IFRS Chapter Summaries Study Questions Study Problems Mini-Case Chapter 4: Financial Analysis—Sizing Up Firm Performance Principle 3: Cash Flows Are the Source of Value Principle 4: Market Prices Reflect Information Principle 5: Individuals Respond to Incentives 4.1 Why Do We Analyze Financial Statements 4.2 Common-Size Statements: Standardizing Financial Information The Common-Size Income Statement: H. J. Boswell, Inc The Common-Size Balance Sheet: H. J. Boswell, Inc 4.3 Using Financial Ratios Liquidity Ratios Capital Structure Ratios Asset Management Efficiency Ratios Profitability Ratios Market Value Ratios Finance for Life: Making That Big Purchase Finance in a Flat World: Ratios and International Accounting Standards Summing Up the Financial Analysis of H. J. Boswell, Inc 4.4 Selecting a Performance Benchmark Trend Analysis Peer-Firm Comparisons 4.5 Limitations of Ratio Analysis Chapter Summaries Study Questions Study Problems Mini-Case Part 2: Valuation of Financial Assets Chapter 5: The Time Value of Money—The Basics Principle 1: Money Has a Time Value 5.1 Using Timelines to Visualize Cash Flows 5.2 Compounding and Future Value Compound Interest and Time Compound Interest and the Interest Rate Techniques for Moving Money Through Time Applying Compounding to Things Other Than Money Compound Interest with Shorter Compounding Periods Finance for Life: Getting on the Property Ladder 5.3 Discounting and Present Value The Mechanics of Discounting Future Cash Flows Two Additional Types of Discounting Problems The Rule of 72 5.4 Making Interest Rates Comparable Calculating the Interest Rate and Converting It to an EAR To the Extreme: Continuous Compounding Finance in a Flat World: Financial Access at Birth Chapter Summaries Study Questions Study Problems Mini-Case Chapter 6: The Time Value of Money—Annuities and Other Topics Principle 1: Money Has a Time Value Principle 3: Cash Flows Are the Source of Value 6.1 Annuities Ordinary Annuities Amortized Loans Annuities Due Finance for Life: Saving for Retirement: Being an Early Bird 6.2 Perpetuities Calculating the Present Value of a Level Perpetuity Calculating the Present Value of a Growing Perpetuity 6.3 Complex Cash Flow Streams Chapter Summaries Study Questions Study Problems Mini-Case Chapter 7: An Introduction to Risk and Return—History of Financial Market Returns Principle 2: There Is a Risk-Return Tradeoff Principle 4: Market Prices Reflect Information 7.1 Realized and Expected Rates of Return and Risk Calculating the Realized Return from an Investment Calculating the Expected Return from an Investment Measuring Risk 7.2 A Brief History of Financial Market Returns U.S. Financial Markets: Domestic Investment Returns Lessons Learned U.S. Stocks Versus Other Categories of Investments Global Financial Markets: International Investing Finance for Life: Your Personal Financial Risk Tolerance 7.3 Geometric Versus Arithmetic Average Rates of Return Computing the Geometric or Compound Average Rate of Return Choosing the Right “Average” 7.4 What Determines Stock Prices The Efficient Markets Hypothesis Do We Expect Financial Markets to Be Perfectly Efficient Market Efficiency: What Does the Evidence Show Chapter Summaries Study Questions Study Problems Mini-Case Chapter 8: Risk and Return—Capital Market Theory Principle 2: There Is a Risk-Return Tradeoff Principle 4: Market Prices Reflect Information 8.1 Portfolio Returns and Portfolio Risk Calculating the Expected Return of a Portfolio Evaluating Portfolio Risk Calculating the Standard Deviation of a Portfolio’s Returns Finance in a Flat World: International Diversification 8.2 Systematic Risk and the Market Portfolio Diversification and Unsystematic Risk Diversification and Systematic Risk Systematic Risk and Beta Calculating the Portfolio Beta 8.3 The Security Market Line and the CAPM Using the CAPM to Estimate Expected Rates of Return Chapter Summaries Study Questions Study Problems Mini-Case Chapter 9: Debt Valuation and Interest Rates Principle 1: Money Has a Time Value Principle 2: There Is a Risk-Return Tradeoff Principle 3: Cash Flows Are the Source of Value 9.1 Overview of Corporate Debt Borrowing Money in the Private Financial Market Borrowing Money in the Public Financial Market Basic Bond Features Finance for Life: Buying a House in the United Kingdom 9.2 Valuing Corporate Debt Valuing Bonds by Discounting Future Cash Flows Step 1: Determine Bondholder Cash Flows Step 2: Estimate the Appropriate Discount Rate Step 3: Calculate the Present Value Using the Discounted Cash Flow 9.3 Bond Valuation: Four Key Relationships Relationship 1 Relationship 2 Relationship 3 Relationship 4 9.4 Types of Bonds Secured Versus Unsecured Priority of Claims Initial Offering Market Abnormal Risk Coupon Level Amortizing or Non-amortizing Convertibility Finance in a Flat World: International Bonds 9.5 Determinants of Interest Rates Inflation and Real Versus Nominal Interest Rates Interest Rate Determinants—Breaking It Down The Maturity-Risk Premium and the Term Structure of Interest Rates Chapter Summaries Study Questions Study Problems Mini-Case Chapter 10: Stock Valuation Principle 1: Money Has a Time Value Principle 2: There Is a Risk-Reward Tradeoff Principle 3: Cash Flows Are the Source of Value Principle 4: Market Prices Reflect Information Principle 5: Individuals Respond to Incentives 10.1 Common Stock Characteristics of Common Stock Finance for Life: Stock Valuation Practices: Scientific Methods or Emotional Reactions Agency Costs and Common Stock Valuing Common Stock Using the Discounted Dividend Model 10.2 The Comparables Approach to Valuing Common Stock Defining the P/E Ratio Valuation Model What Determines the P/E Ratio for a Stock An Aside on Managing for Shareholder Value A Word of Caution About P/E Ratios 10.3 Preferred Stock Features of Preferred Stock Valuing Preferred Stock A Quick Review: Valuing Bonds, Preferred Stock, and Common Stock Chapter Summaries Study Questions Study Problems Mini-Case Part 3: Capital Budgeting Chapter 11: Investment Decision Criteria Principle 1: Money Has a Time Value Principle 2: There Is a Risk-Return Tradeoff Principle 3: Cash Flows Are the Source of Value Principle 5: Individuals Respond to Incentives 11.1 An Overview of Capital Budgeting The Typical Capital-Budgeting Process What Are the Sources of Good Investment Projects Types of Capital Investment Projects 11.2 Net Present Value Why Is the NPV the Right Criterion Calculating an Investment’s NPV Independent Versus Mutually Exclusive Investment Projects 11.3 Other Investment Criteria Profitability Index Internal Rate of Return Modified Internal Rate of Return Finance for Life: Higher Education as an Investment in Yourself Payback Period Discounted Payback Period Summing Up the Alternative Decision Rules 11.4 A Glance at Actual Capital-Budgeting Practices Chapter Summaries Study Questions Study Problems Mini-Cases Chapter 12: Analyzing Project Cash Flows Principle 3: Cash Flows Are the Source of Value Principle 5: Individuals Respond to Incentives 12.1 Project Cash Flows Incremental Cash Flows Are What Matters Guidelines for Forecasting Incremental Cash Flows 12.2 Forecasting Project Cash Flows Dealing with Depreciation Expense, Taxes, and Cash Flow Four-Step Procedure for Calculating Project Cash Flows Computing Project NPV 12.3 Inflation and Capital Budgeting Estimating Nominal Cash Flows 12.4 Replacement Project Cash Flows Category 1: Initial Outlay, CF0 Category 2: Annual Cash Flows Replacement Example Finance in a Flat World: Entering New Markets Chapter Summaries Study Questions Study Problems Mini-Cases Appendix: The Modified Accelerated Cost Recovery System Chapter 13: Risk Analysis and Project Evaluation Principle 1: Money Has a Time Value Principle 2: There Is a Risk-Return Tradeoff Principle 3: Cash Flows Are the Source of Value 13.1 The Importance of Risk Analysis 13.2 Tools for Analyzing the Risk of Project Cash Flows Key Concepts: Expected Values and Value Drivers Sensitivity Analysis Scenario Analysis Simulation Analysis Finance in a Flat World: Currency Risk 13.3 Break-Even Analysis Accounting Break-Even Analysis Cash Break-Even Analysis NPV Break-Even Analysis Operating Leverage and the Volatility of Project Cash Flows 13.4 Real Options in Capital Budgeting The Option to Delay the Launch of a Project The Option to Expand a Project The Option to Reduce the Scale and Scope of a Project Chapter Summaries Study Questions Study Problems Mini-Case Chapter 14: The Cost of Capital Principle 1: Money Has a Time Value Principle 2: There Is a Risk-Return Tradeoff Principle 3: Cash Flows Are the Source of Value Principle 4: Market Prices Reflect Information Principle 5: Individuals Respond to Incentives 14.1 The Cost of Capital: An Overview Investor’s Required Return and the Firm’s Cost of Capital WACC Equation Three-Step Procedure for Estimating the Firm’s WACC 14.2 Determining the Firm’s Capital Structure Weights 14.3 Estimating the Cost of Individual Sources of Capital The Cost of Debt The Cost of Preferred Equity The Cost of Common Equity 14.4 Summing Up: Calculating the Firm’s WACC Use Market-Based Weights Use Market-Based Costs of Capital Use Forward-Looking Weights and Opportunity Costs Weighted Average Cost of Capital in Practice 14.5 Estimating Project Costs of Capital The Rationale for Using Multiple Discount Rates Why Don’t Firms Typically Use Project Costs of Capital Estimating Divisional WACCs Divisional WACC: Estimation Issues and Limitations Finance in a Flat World: Why Do Interest Rates Differ Among Countries 14.6 Flotation Costs and Project NPV WACC, Flotation Costs, and the NPV Chapter Summaries Study Questions Study Problems Mini-Case Part 4: Capital Structure and Dividend Policy Chapter 15: Capital Structure Policy Principle 2: There Is a Risk-Return Tradeoff Principle 3: Cash Flows Are the Source of Value Principle 5: Individuals Respond to Incentives 15.1 A Glance at Capital Structure Choices in Practice Defining a Firm’s Capital Structure Financial Leverage How Do Firms in Different Industries Finance Their Assets 15.2 Capital Structure Theory A First Look at the Modigliani and Miller Capital Structure Theorem Yogi Berra and the M&M Capital Structure Theory Capital Structure, the Cost of Equity, and the Weighted Average Cost of Capital Why Capital Structure Matters in Reality Making Financing Choices When Managers Are Better Informed than Shareholders Managerial Implications 15.3 Why Do Capital Structures Differ Across Industries 15.4 Making Financing Decisions Benchmarking the Firm’s Capital Structure Evaluating the Effect of Financial Leverage on Firm Earnings per Share Using the EBIT-EPS Chart to Analyze the Effect of Capital Structure on EPS Can the Firm Afford More Debt Survey Evidence: Factors That Influence CFO Debt Policy Finance in a Flat World: Capital Structures Around the World Lease Versus Buy Finance for Life: Leasing or Buying a Car Chapter Summaries Study Questions Study Problems Mini-Case Appendix: Demonstrating the Modigliani and Miller Theorem Chapter 16: Dividend and Share Repurchase Policy Principle 1: Money Has a Time Value Principle 3: Cash Flows Are the Source of Value Principle 4: Market Prices Reflect Information 16.1 How Do Firms Distribute Cash to Their Shareholders Cash Dividends Stock Repurchases How Do Firms Repurchase Their Shares Personal Tax Considerations: Dividend Versus Capital Gains Income Noncash Distributions: Stock Dividends and Stock Splits 16.2 Does Dividend Policy Matter The Irrelevance of the Distribution Choice Why Dividend Policy Is Important Finance for Life: How Tax Policies Influence Dividend Distribution 16.3 Cash Distribution Policies in Practice Stable Dividend Payout Policy Residual Dividend Payout Policy Other Factors Playing a Role in How Much to Distribute Chapter Summaries Study Questions Study Problems Mini-Case Part 5: Liquidity Management and Special Topics in Finance Chapter 17: Financial Forecasting and Planning Principle 2: There Is a Risk-Return Tradeoff 17.1 An Overview of Financial Planning 17.2 Developing a Long-Term Financial Plan Financial Forecasting Example: Ziegen, Inc Finance for Life: Your Personal Budget 17.3 Developing a Short-Term Financial Plan Cash Budget Example: Melco Furniture, Inc Uses of the Cash Budget Chapter Summaries Study Questions Study Problems Mini-Case Chapter 18: Working-Capital Management Principle 2: There Is a Risk-Return Tradeoff 18.1 Working-Capital Management and the Risk-Return Tradeoff Measuring Firm Liquidity Managing Firm Liquidity Risk-Return Tradeoff 18.2 Working-Capital Policy The Principle of Self-Liquidating Debt A Graphic Illustration of the Principle of Self-Liquidating Debt 18.3 Operating and Cash Conversion Cycles Measuring Working-Capital Efficiency Calculating the Operating and Cash Conversion Cycles 18.4 Managing Current Liabilities Calculating the Cost of Short-Term Financing Evaluating the Cost of Trade Credit Evaluating the Cost of Bank Loans 18.5 Managing the Firm’s Investment in Current Assets Managing Cash and Marketable Securities Managing Accounts Receivable Finance for Life: Your Credit Score Managing Inventories Chapter Summaries Study Questions Study Problems Mini-Case Chapter 19: International Business Finance Principle 2: There Is a Risk-Return Tradeoff Principle 3: Cash Flows Are the Source of Value 19.1 Foreign Exchange Markets and Currency Exchange Rates What a Change in the Exchange Rate Means for Business Foreign Exchange Rates Types of Foreign Exchange Transactions 19.2 Interest Rate and Purchasing-Power Parity Interest Rate Parity Purchasing-Power Parity and the Law of One Price The International Fisher Effect 19.3 Capital Budgeting for Direct Foreign Investment Finance for Life: International Investing Foreign Investment Risks Chapter Summaries Study Questions Study Problems Mini-Case Chapter 20: Corporate Risk Management Principle 1: Money Has a Time Value Principle 2: There Is a Risk-Return Tradeoff 20.1 Five-Step Corporate Risk Management Process Step 1: Identify and Understand the Firm’s Major Risks Step 2: Decide Which Types of Risks to Keep and Which to Transfer Step 3: Decide How Much Risk to Assume Step 4: Incorporate Risk into All the Firm’s Decisions and Processes Step 5: Monitor and Manage the Firm’s Risk Exposure 20.2 Managing Risk with Insurance Contracts Types of Insurance Contracts Why Purchase Insurance Finance for Life: Do You Need Life Insurance 20.3 Managing Risk by Hedging with Forward Contracts Hedging Commodity Price Risk Using Forward Contracts Hedging Currency Risk Using Forward Contracts 20.4 Managing Risk with Exchange-Traded Financial Derivatives Futures Contracts Option Contracts 20.5 Valuing Options and Swaps The Black-Scholes Option Pricing Model Swap Contracts Credit Default Swaps Chapter Summaries Study Questions Study Problems Mini-Case Glossary Indexes Organization Index A B C D E F G H I J K L M N O P Q R S T U V W Y Z Subject Index A B C D E F G H I J K L M N O P Q R S T U V W Y Z
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