Principles of Managerial Finance, 15/e

Book Description

Help students apply financial concepts to solve real world problems with a proven teaching and learning framework

The Teaching and Learning System-a hallmark feature of Principles of Managerial Finance -- weaves pedagogy into concepts and practice, giving students a roadmap to follow through the text and supplementary tools. The 15th Edition concentrates on the material students need to know in order to make effective financial decisions in an increasingly competitive business environment. It allows students to make the connections between a firm—s action and its value, as determined in the financial market. With a generous amount of examples, this text is an easily accessible resource for in- and out-of-class learning.

Table of Contents

  1. Principles of Managerial Finance
  2. Principles of Managerial Finance
  3. Copyright Page
  4. Dedication
  5. About the Authors
  6. Preface
    1. New to This Edition
    2. Solving Teaching and Learning Challenges
    3. MyLab Finance
    4. Developing Employability Skills
    5. Table of Contents Overview
    6. Instructor Teaching Resources
  7. To Our Colleagues, Friends, and Family
  8. Part One Introduction to Managerial Finance
    1. Chapter 1 The Role of Managerial Finance
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 1.1 Finance and the Firm
        1. What is Finance?
        2. What is a Firm?
        3. What is the Goal of the Firm?
          1. Maximize Shareholder Wealth
          2. Maximize Profit?
            1. Timing
            2. Cash Flows
            3. Risk
          3. Maximize Stakeholders’ Welfare?
        4. The Role of Business Ethics
          1. Ethical Guidelines
          2. Ethics and Share Price
            1. Review Questions MyLab Finance Solutions
      4. 1.2 Managing the Firm
        1. The Managerial Finance Function
          1. Financial Managers’ Key Decisions
          2. Principles That Guide Managers’ Decisions
            1. The Time Value of Money
            2. The Tradeoff between Return and Risk
            3. Cash Is King
            4. Competitive Financial Markets
            5. Incentives Are Important
          3. Organization of the Finance Function
          4. Relationship to Economics
          5. Relationship to Accounting
            1. Emphasis on Cash Flows
            2. Decision Making
              1. Review Questions MyLab Finance Solutions
      5. 1.3 Organizational Forms, Taxation, and the Principal–Agent RelationshipOrganizational Forms, Taxation, and the Principal–Agent Relationship
        1. Legal Forms of Business Organization
          1. Sole Proprietorships
          2. Partnerships
          3. Corporations
          4. Business Organizational Forms and Taxation
          5. Other Limited Liability Organizations
        2. Agency Problems and Agency Costs
        3. Corporate Governance
          1. Internal Corporate Governance Mechanisms
          2. External Corporate Governance Mechanisms
            1. Individual versus Institutional Investors
            2. The Threat of Takeover
          3. Government Regulation
            1. Review Questions MyLab Finance Solutions
      6. 1.4 Developing Skills for Your Career
        1. Critical Thinking
        2. Communication and Collaboration
        3. Financial Computing Skills
      7. Summary
        1. Focus on Value
        2. Review of Learning Goals
      8. Opener-in-Review
      9. Self-Test Problem (Solution in Appendix)
      10. Warm-Up Exercises All problems are available in MyLab Finance
      11. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
      12. Spreadsheet Exercise
        1. To Do
    2. Chapter 2 The Financial Market Environment
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 2.1 Financial Institutions
        1. Commercial Banks, Investment Banks, and the Shadow Banking System
          1. Commercial Banks
          2. Investment Banks
          3. Shadow Banking System
            1. Review Questions MyLab Finance Solutions
      4. 2.2 Financial Markets
        1. The Relationship between Institutions and Markets
        2. The Money Market
        3. The Capital Market
          1. Key Securities Traded: Bonds and Stocks
          2. Broker Markets and Dealer Markets
            1. Broker Markets
            2. Dealer Markets
          3. International Capital Markets
        4. The Role of Capital Markets
          1. The Efficient-Market Hypothesis
            1. Review Questions MyLab Finance Solutions
      5. 2.3 Regulation of Financial Markets and Institutions
        1. Regulations Governing Financial Institutions
        2. Regulations Governing Financial Markets
          1. Review Questions MyLab Finance Solutions
      6. 2.4 The Securities Issuing Process
        1. Issuing Common Stock
          1. Private Equity
            1. Organization and Investment Stages
            2. Deal Structure and Pricing
          2. Going Public
          3. The Investment Bank’s Role
            1. Review Questions MyLab Finance Solutions
      7. 2.5 Financial Markets in Crisis
        1. Financial Institutions and Real Estate Finance
          1. Falling Home Prices and Delinquent Mortgages
          2. Crisis of Confidence in Banks
        2. Spillover Effects and Recovery from the Great Recession
          1. Review Questions MyLab Finance Solutions
      8. Summary
        1. The Role of Financial Institutions and Markets
        2. Review of Learning Goals
      9. Opener-in-Review
      10. Self-Test Problem (Solution in Appendix)
      11. Warm-Up Exercises All problems are available in MyLab Finance
      12. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
      13. Spreadsheet Exercise
        1. To Do
  9. Part Two Financial Tools
    1. Chapter 3 Financial Statements and Ratio Analysis
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 3.1 The Stockholders’ ReportThe Stockholders’ Report
        1. The Letter to Stockholders
        2. The Four Key Financial Statements
          1. Income Statement
          2. Balance Sheet
          3. Statement of Retained Earnings
          4. Statement of Cash Flows
        3. Notes to the Financial Statements
        4. Consolidating International Financial Statements
          1. Review Questions MyLab Finance Solutions
      4. 3.2 Using Financial Ratios
        1. Interested Parties
        2. Types of Ratio Comparisons
          1. Cross-Sectional Analysis
          2. Time-Series Analysis
          3. Combined Analysis
        3. Cautions About Using Ratio Analysis
          1. Review Questions MyLab Finance Solutions
      5. 3.3 Liquidity Ratios
        1. Current Ratio
        2. Quick (Acid-Test) Ratio
          1. Review Questions MyLab Finance Solutions
      6. 3.4 Activity Ratios
        1. Inventory Turnover
        2. Average Collection Period
        3. Average Payment Period
        4. Total Asset Turnover
          1. Review Question MyLab Finance Solutions
      7. 3.5 Debt Ratios
        1. Debt Ratio
        2. Debt-to-Equity Ratio
        3. Times Interest Earned Ratio
        4. Fixed-Payment Coverage Ratio
          1. Review Questions MyLab Finance Solutions
      8. 3.6 Profitability Ratios
        1. Common-Size Income Statements
        2. Gross Profit Margin
        3. Operating Profit Margin
        4. Net Profit Margin
        5. Earnings Per Share (EPS)
        6. Return on Total Assets (ROA)
        7. Return on Equity (ROE)
          1. Review Questions MyLab Finance Solutions
      9. 3.7 Market Ratios
        1. Price/Earnings (P/E) Ratio
        2. Market/Book (M/B) Ratio
          1. Review Questions MyLab Finance Solutions
      10. 3.8 A Complete Ratio Analysis
        1. Summary of Whole Foods’ Financial Condition
          1. Liquidity
          2. Activity
          3. Debt
          4. Profitability
          5. Market
        2. DuPont System of Analysis
          1. DuPont Formula
          2. Modified DuPont Formula
          3. Applying the DuPont System
            1. Review Questions MyLab Finance Solutions
      11. Summary
        1. Focus on Value
        2. Review of Learning Goals
      12. Opener-in-Review
      13. Self-Test Problems (Solutions in Appendix)
      14. Warm-Up Exercises All problems are available in MyLab Finance
      15. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
      16. Spreadsheet Exercise
        1. To Do
    2. Chapter 4 Long- and Short-Term Financial Planning
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 4.1 The Financial Planning Process
        1. Long-Term (Strategic) Financial Plans
        2. Short-Term (Operating) Financial Plans
          1. Review Questions MyLab Finance Solutions
      4. 4.2 Measuring the Firm’s Cash FlowMeasuring the Firm’s Cash Flow
        1. Depreciation
          1. Depreciable Value of an Asset
          2. Depreciable Life of an Asset
        2. Depreciation Methods
        3. Developing the Statement of Cash Flows
          1. Classifying Inflows and Outflows of Cash
          2. Preparing the Statement of Cash Flows
          3. Interpreting the Statement
            1. Operating Cash Flow
        4. Free Cash Flow
          1. Review Questions MyLab Finance Solutions
      5. 4.3 Cash Planning: Cash Budgets
        1. The Sales Forecast
        2. Preparing the Cash Budget
          1. Total Cash Receipts
          2. Total Cash Disbursements
          3. Net Cash Flow, Ending Cash, Financing, and Excess Cash
        3. Evaluating the Cash Budget
        4. Coping With Uncertainty in the Cash Budget
        5. Cash Flow Within the Month
          1. Review Questions MyLab Finance Solutions
      6. 4.4 Profit Planning: Pro Forma Statements
        1. Preceding Year’s Financial Statements
        2. Sales Forecast
          1. Review Question MyLab Finance Solutions
      7. 4.5 Preparing the Pro Forma Income Statement
        1. Considering Types of Costs and Expenses
          1. Review Questions MyLab Finance Solutions
      8. 4.6 Preparing the Pro Forma Balance Sheet
        1. Review Questions MyLab Finance Solutions
      9. 4.7 Evaluation of Pro Forma Statements
        1. Review Questions MyLab Finance Solutions
      10. Summary
        1. Focus on Value
        2. Review of Learning Goals
      11. Opener-in-Review
      12. Self-Test Problems (Solutions in Appendix)
      13. Warm-Up Exercises All problems are available in MyLab Finance
      14. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
      15. Spreadsheet Exercise
        1. To Do
    3. Chapter 5 Time Value of Money
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 5.1 The Role of Time Value in Finance
        1. Future Value Versus Present Value
        2. Computational Tools
          1. Financial Calculators
          2. Electronic Spreadsheets
          3. Cash Flow Signs
        3. Basic Patterns of Cash Flow
          1. Review Questions MyLab Finance Solutions
      4. 5.2 Single Amounts
        1. Future Value of A Single Amount
          1. The Concept of Future Value
          2. The Equation for Future Value
          3. A Graphical View of Future Value
          4. Compound Interest versus Simple Interest
        2. Present Value of A Single Amount
          1. The Concept of Present Value
          2. The Equation for Present Value
          3. A Graphical View of Present Value
            1. Review Questions MyLab Finance Solutions
            2. Excel Review Questions MyLab Finance Solutions
      5. 5.3 Annuities
        1. Types of Annuities
        2. Finding the Future Value of An Ordinary Annuity
        3. Finding the Present Value of An Ordinary Annuity
        4. Finding the Future Value of An Annuity Due
          1. Comparison of An Annuity Due with an Ordinary Annuity Future Value
        5. Finding the Present Value of An Annuity Due
          1. Comparison of an Annuity Due with an Ordinary Annuity Present Value
        6. Finding The Present Value of A Perpetuity
          1. Excel Review Questions MyLab Finance Solutions
          2. Excel Review Questions MyLab Finance Solutions
      6. 5.4 Mixed Streams
        1. Future Value of a Mixed Stream
        2. Present Value of A Mixed Stream
          1. Review Question MyLab Finance Solutions
          2. Excel Review Question MyLab Finance Solutions
      7. 5.5 Compounding Interest More Frequently Than Annually
        1. Semiannual Compounding
        2. Quarterly Compounding
        3. A General Equation For Compounding
        4. Using Computational Tools for Compounding
        5. Continuous Compounding
        6. Nominal and Effective Annual Rates of Interest
          1. Review Questions MyLab Finance Solutions
          2. Excel Review Questions MyLab Finance Solutions
      8. 5.6 Special Applications of Time Value
        1. Determining Deposits Needed to Accumulate A Future Sum
        2. Loan Amortization
        3. Finding Interest or Growth Rates
        4. Finding An Unknown Number of Periods
          1. Review Questions MyLab Finance Solutions
          2. Excel Review Questions MyLab Finance Solutions
      9. Summary
        1. Focus on Value
        2. Review of Learning Goals
      10. Opener-in-Review
      11. Self-Test Problems (Solutions in Appendix)
      12. Warm-Up Exercises All problems are available in MyLab Finance.
      13. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
        4. Personal Finance Problem
        5. Personal Finance Problem
        6. Personal Finance Problem
        7. Personal Finance Problem
        8. Personal Finance Problem
        9. Personal Finance Problem
        10. Personal Finance Problem
        11. Personal Finance Problem
        12. Personal Finance Problem
        13. Personal Finance Problem
        14. Personal Finance Problem
        15. Personal Finance Problem
        16. Personal Finance Problem
        17. Personal Finance Problem
        18. Personal Finance Problem
        19. Personal Finance Problem
        20. Personal Finance Problem
        21. Personal Finance Problem
        22. Personal Finance Problem
        23. Personal Finance Problem
        24. Personal Finance Problem
        25. Personal Finance Problem
        26. Personal Finance Problem
        27. Personal Finance Problem
        28. Personal Finance Problem
        29. Personal Finance Problem
        30. Personal Finance Problem
        31. Spreadsheet Exercise
          1. To Do
  10. Part Three Valuation of Securities,
    1. Chapter 6 Interest Rates and Bond Valuation
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 6.1 Interest Rates and Required Returns
        1. Interest Rate Fundamentals
          1. Negative Interest Rates
          2. Nominal and Real Interest Rates
          3. Nominal Interest Rates, Inflation, and Risk
        2. Term Structure of Interest Rates
          1. Yield Curves
          2. Theories of the Term Structure
            1. Expectations Theory
            2. Liquidity Preference Theory
            3. Market Segmentation Theory
        3. Risk Premiums: Issuer and Issue Characteristics
          1. Review Questions MyLab Finance Solutions
      4. 6.2 Government and Corporate Bonds
        1. Legal Aspects of Corporate Bonds
          1. Bond Indenture
            1. Standard Provisions
            2. Restrictive Provisions
            3. Sinking-Fund Requirements
            4. Security or Collateral
          2. Trustee
        2. Cost of Bonds to the Issuer
          1. Impact of Bond Maturity
          2. Impact of Offering Size
          3. Impact of Issuer’s Risk
          4. Impact of the Cost of Money
        3. General Features of a Bond Issue
        4. Bond Yields
        5. Bond Prices
        6. Bond Ratings
        7. Common Types of Bonds
        8. International Bond Issues
          1. Review Questions MyLab Finance Solutions
      5. 6.3 Valuation Fundamentals
        1. Key Inputs
          1. Cash Flows
          2. Timing
          3. Risk and Required Return
        2. Basic Valuation Model
          1. Review Questions MyLab Finance Solutions
      6. 6.4 Bond Valuation
        1. Bond Fundamentals
        2. Bond Valuation
        3. Semiannual Interest Rates and Bond Values
        4. Changes In Bond Values
          1. Required Returns and Bond Values
          2. Time to Maturity and Bond Values
            1. Constant Required Returns
            2. Changing Required Returns
        5. Yield to Maturity (YTM)
          1. Review Questions MyLab Finance Solutions
          2. Excel Review Questions MyLab Finance Solutions
      7. Summary
        1. Focus on Value
        2. Review of Learning Goals
      8. Opener-in-Review
      9. Self-Test Problems (Solutions in Appendix)
      10. Warm-Up Exercises All problems are available in MyLab Finance.
      11. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
        4. Personal Finance Problem
        5. Personal Finance Problem
      12. Spreadsheet Exercise
        1. To Do
    2. Chapter 7 Stock Valuation
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 7.1 Differences Between Debt and Equity
        1. Voice in Management
        2. Claims on Income and Assets
        3. Maturity
        4. Tax Treatment
          1. Review Question MyLab Finance Solution
      4. 7.2 Common and Preferred Stock
        1. Common Stock
          1. Ownership
          2. Par Value
          3. Preemptive Rights
          4. Authorized, Outstanding, and Issued Shares
          5. Voting Rights
          6. Dividends
          7. International Stock Issues
        2. Preferred Stock
          1. Basic Rights of Preferred Stockholders
          2. Features of Preferred Stock
            1. Restrictive Covenants
            2. Cumulation
            3. Other Features
              1. Review Questions MyLab Finance Solutions
      5. 7.3 Common Stock Valuation
        1. Market Efficiency and Stock Valuation
          1. The Behavioral Finance Challenge
        2. Common Stock Dividend Valuation Model
          1. Zero-Growth Dividend Model
            1. Preferred Stock Valuation
          2. Constant-Growth Dividend Model
          3. Variable-Growth Dividend Model
        3. Free Cash Flow Stock Valuation Model
        4. Other Approaches to Common Stock Valuation
          1. Book Value
          2. Liquidation Value
          3. Price/Earnings (P/E) Multiples
            1. Review Questions MyLab Finance Solutions
      6. 7.4 Decision Making and Common Stock Value
        1. Changes in Expected Dividends
        2. Changes in Risk
        3. Combined Effect
          1. Review Questions MyLab Finance Solutions
      7. Summary
        1. Focus on Value
        2. Review of Learning Goals
      8. Opener-in-Review
      9. Self-Test Problems (Solutions in Appendix)
      10. Warm-Up Exercises All problems are available in MyLab Finance.
      11. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
        4. Personal Finance Problem
        5. Personal Finance Problem
      12. Spreadsheet Exercise
        1. To Do
  11. Part Four Risk and the Required Rate of Return
    1. Chapter 8 Risk and Return
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Operations
        2. In Your Personal Life
      3. 8.1 Risk and Return Fundamentals
        1. What is Risk?
        2. What is Return?
        3. Risk Preferences
          1. Review Questions MyLab Finance Solutions
      4. 8.2 Risk of a Single Asset
        1. Risk Assessment
          1. Scenario Analysis
          2. Probability Distributions
        2. Risk Measurement
          1. Standard Deviation
            1. Historical Returns and Risk
            2. Normal Distribution
          2. Coefficient of Variation: Trading Off Risk and Return
            1. Review Questions MyLab Finance Solutions
      5. 8.3 Risk of a Portfolio
        1. Portfolio Return and Standard Deviation
        2. Correlation
        3. Diversification
        4. Correlation, Diversification, Risk, and Return
        5. International Diversification
          1. Returns from International Diversification
          2. Risks of International Diversification
            1. Review Questions MyLab Finance Solutions
      6. 8.4 Risk and Return: The Capital Asset Pricing Model (CAPM)
        1. Types of Risk
        2. The Model: CAPM
          1. Beta Coefficient
            1. Deriving Beta from Return Data
            2. Interpreting Betas
            3. Portfolio Betas
          2. The Equation
            1. Historical Risk Premiums
          3. The Graph: The Security Market Line (SML)
          4. Shifts in the Security Market Line
            1. Changes in Inflationary Expectations
            2. Changes in Risk Aversion
          5. Some Comments on the CAPM
            1. Review Questions MyLab Finance Solutions
      7. Summary
        1. Focus on Value
        2. Review of Learning Goals
      8. Opener-in-Review
      9. Self-Test Problems (Solutions in Appendix)
      10. Warm-Up Exercises All problems are available in MyLab Finance.
      11. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
        4. Personal Finance Problem
        5. Personal Finance Problem
        6. Personal Finance Problem
        7. Personal Finance Problem
      12. Spreadsheet Exercise
        1. To Do
    2. Chapter 9 The Cost of Capital
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 9.1 Overview of the Cost of Capital
        1. The Basic Concept
        2. Sources of Long-Term Capital
          1. Review Questions MyLab Finance Solutions
      4. 9.2 Cost of Long-Term Debt
        1. Net Proceeds
        2. Before-Tax Cost of Debt
          1. Using Market Quotations
          2. Calculating the Cost
          3. Approximating the Cost
        3. After-Tax Cost of Debt
          1. Review Questions MyLab Finance Solutions
          2. Excel Review Question MyLab Finance Solutions
      5. 9.3 Cost of Preferred Stock
        1. Preferred Stock Dividends
        2. Calculating the Cost of Preferred Stock
          1. Review Question MyLab Finance Solution
      6. 9.4 Cost of Common Stock
        1. Finding the Cost of Common Stock Equity
          1. Using the Constant-Growth Valuation (Gordon Growth) Model
          2. Using the Capital Asset Pricing Model (CAPM)
          3. Comparing Constant-Growth and CAPM Techniques
          4. Flotation Costs and the Cost of Common Equity
        2. Cost of Retained Earnings
          1. Review Questions MyLab Finance Solutions
      7. 9.5 Weighted Average Cost of Capital
        1. Calculating the Weighted Average Cost of Capital (WACC)
        2. Capital Structure Weights
          1. Review Questions MyLab Finance Solutions
      8. Summary
        1. Focus on Value
        2. Review of Learning Goals
      9. Opener-in-Review
      10. Self-Test Problem (Solutions in Appendix)
      11. Warm-Up Exercises All problems are available in MyLab Finance
      12. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
      13. Spreadsheet Exercise
        1. To Do
  12. Part Five Long-Term Investment Decisions
    1. Chapter 10 Capital Budgeting Techniques
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 10.1 Overview of Capital Budgeting
        1. Motives For Capital Expenditure
        2. Steps in the Process
        3. Basic Terminology
          1. Independent versus Mutually Exclusive Projects
          2. Unlimited Funds versus Capital Rationing
          3. Accept–Reject versus Ranking Approaches
        4. Capital Budgeting Techniques
          1. Bennett Company’s Relevant Cash Flows
            1. Review Question MyLab Finance Solution
      4. 10.2 Payback Period
        1. Decision Criteria
        2. Pros and Cons of Payback Analysis
          1. Review Questions MyLab Finance Solutions
      5. 10.3 Net Present Value (NPV)
        1. Decision Criteria
        2. NPV and The Profitability Index
        3. NPV and Economic Value Added
          1. Review Questions MyLab Finance Solutions
          2. Excel Review Question MyLab Finance Solutions
      6. 10.4 Internal Rate of Return (IRR)
        1. Decision Criteria
        2. Calculating The IRR
          1. Review Questions MyLab Finance Solutions
          2. Excel Review Question MyLab Finance Solutions
      7. 10.5 Comparing NPV and IRR Techniques
        1. Net Present Value Profiles
        2. Conflicting Rankings
          1. Reinvestment Assumption
          2. Timing of the Cash Flow
          3. Magnitude of the Initial Investment
        3. Which Approach is Better?
          1. Theoretical View
          2. Practical View
            1. Review Questions MyLab Finance Solutions
      8. Summary
        1. Focus on Value
        2. Review of Learning Goals
      9. Opener-in-Review
      10. Self-Test Problem (Solutions in Appendix)
      11. Warm-Up Exercises All problems are available in MyLab Finance
      12. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
      13. Spreadsheet Exercise
        1. To Do
    2. Chapter 11 Capital Budgeting Cash Flows
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 11.1 Project Cash Flows
        1. Major Cash Flow Types
        2. Replacement Versus Expansion Decisions
        3. Sunk Costs and Opportunity Costs
        4. International Capital Budgeting and Long-Term Investments
          1. Review Questions MyLab Finance Solutions
      4. 11.2 Finding the Initial Investment
        1. Installed Cost of the New Asset
        2. After-Tax Proceeds from the Sale of the Old Asset
          1. Book Value
        3. Change in Net Working Capital
        4. Calculating the Initial Investment
          1. Review Questions MyLab Finance Solutions
      5. 11.3 Finding the Operating Cash Flows
        1. Interpreting the Term Cash Flows
        2. Interpreting the Term After-Tax
        3. Interpreting the Term Incremental
          1. Review Questions MyLab Finance Solutions
      6. 11.4 Finding the Terminal Cash Flow
        1. After-Tax Proceeds from the Sale of New and Old Assets
        2. Change in Net Working Capital
          1. Review Question MyLab Finance Solution
      7. 11.5 Summarizing the Net Cash Flows
        1. Review Question MyLab Finance Solution
      8. Summary
        1. Focus on Value
        2. Review of Learning Goals
      9. Opener-in-Review
      10. Self-Test Problems (Solutions in Appendix)
      11. Warm-Up Exercises All problems are available in MyLab Finance.
      12. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
      13. Spreadsheet Exercise
        1. To Do
    3. Chapter 12 Risk and Refinements in Capital BudgetingRisk and Refinements in Capital Budgeting
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 12.1 Introduction to Risk in Capital Budgeting
        1. Review Question MyLab Finance Solution
      4. 12.2 Behavioral Approaches for Dealing with Risk
        1. Breakeven Analysis
        2. Scenario Analysis
        3. Simulation
          1. Review Questions MyLab Finance Solutions
          2. EXCEL Review Question MyLab Finance Solution
      5. 12.3 International Risk Considerations
        1. Review Question MyLab Finance Solution
      6. 12.4 Risk-Adjusted Discount Rates
        1. Determining Risk-Adjusted Discount Rates (Radrs)
          1. Review of CAPM
          2. Using CAPM to Find RADRs
        2. Applying Radrs
        3. Portfolio Effects
        4. RADRs In Practice
          1. Review Questions MyLab Finance Solutions
      7. 12.5 Capital Budgeting Refinements
        1. Comparing Projects With Unequal Lives
          1. The Problem
          2. Annualized Net Present Value (ANPV) Approach
        2. Recognizing Real Options
        3. Capital Rationing
          1. Internal Rate of Return Approach
          2. Net Present Value Approach
            1. Review Questions MyLab Finance Solutions
            2. Excel Review Question MyLab Finance Solutions
      8. Summary
        1. Focus on Value
        2. Review of Learning Goals
      9. Opener-in-Review
      10. Self-Test Problem (Solutions in Appendix)
      11. Warm-Up Exercises All problems are available in MyLab Finance.
      12. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
      13. Spreadsheet Exercise
        1. To Do
  13. Part Six Long-Term Financial Decisions
    1. Chapter 13 Leverage and Capital Structure
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 13.1 Leverage
        1. Breakeven Analysis
          1. Algebraic Approach
          2. Graphical Approach
          3. Changing Costs and the Operating Breakeven Point
        2. Operating Leverage
          1. Measuring the Degree of Operating Leverage (DOL)
          2. Fixed Costs and Operating Leverage
        3. Financial Leverage
          1. Measuring the Degree of Financial Leverage (DFL)
        4. Total Leverage
          1. Measuring the Degree of Total Leverage (DTL)
          2. Relationship of Operating, Financial, and Total Leverage
            1. Review Questions MyLab Finance Solutions
      4. 13.2 The Firm’s Capital StructureThe Firm’s Capital Structure
        1. Types of Capital
        2. External Assessment of Capital Structure
        3. Capital Structure of Non–U.S. Firms
        4. Capital Structure Theory
          1. Tax Benefits
          2. Bankruptcy Costs and the Probability of Bankruptcy
            1. Business Risk
            2. Financial Risk
            3. Total Risk
          3. Agency Costs Imposed by Lenders
          4. Asymmetric Information
            1. Pecking Order Theory
            2. Signaling Theory
        5. Optimal Capital Structure
          1. Cost Functions
          2. Graphical View of Optimal Structure
            1. Review Questions MyLab Finance Solutions
      5. 13.3 EBIT–EPS Approach to Capital StructureEBIT–EPS Approach to Capital Structure
        1. Presenting a Financing Plan Graphically
          1. Data Required
          2. Plotting the Data
        2. Comparing Alternative Capital Structures
        3. Considering Risk in Ebit–EPS Analysis
        4. Basic Shortcoming of Ebit–EPS Analysis
          1. Review Question MyLab Finance Solutions
      6. 13.4 Choosing the Optimal Capital Structure
        1. Linkage
        2. Estimating Value
        3. Maximizing Value Versus Maximizing EPS
        4. Some Other Important Considerations
          1. Review Questions MyLab Finance Solutions
      7. Summary
        1. Focus on Value
        2. Review of Learning Goals
      8. Opener-in-Review
      9. Self-Test Problems (Solutions in Appendix)
      10. Warm-Up Exercises All problems are available in MyLab Finance
      11. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
      12. Spreadsheet Exercise
        1. To Do
    2. Chapter 14 Payout Policy
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 14.1 The Basics of Payout Policy
        1. Elements of Payout Policy
        2. Trends in Earnings and Dividends
        3. Trends in Dividends and Share Repurchases
          1. Review Questions MyLab Finance Solutions
      4. 14.2 The Mechanics of Payout Policy
        1. Cash Dividend Payment Procedures
        2. Share Repurchase Procedures
        3. Tax Treatment of Dividends and Repurchases
        4. Dividend Reinvestment Plans
        5. Stock Price Reactions to Corporate Payouts
          1. Review Questions MyLab Finance Solutions
      5. 14.3 Relevance of Payout Policy
        1. Residual Theory of Dividends
        2. The Dividend Irrelevance Theory
        3. Arguments for Dividend Relevance
          1. Review Questions MyLab Finance Solutions
      6. 14.4 Factors Affecting Dividend Policy
        1. Legal Constraints
        2. Contractual Constraints
        3. Growth Prospects
        4. Owner Considerations
        5. Market Considerations
          1. Review Question MyLab Finance Solution
      7. 14.5 Types of Dividend Policies
        1. Constant-Payout-Ratio Dividend Policy
        2. Regular Dividend Policy
        3. Low-Regular-And-Extra Dividend Policy
          1. Review Question MyLab Finance Solution
      8. 14.6 Other Forms of Dividends
        1. Stock Dividends
          1. Accounting Aspects
          2. Shareholder’s Viewpoint
          3. The Company’s Viewpoint
        2. Stock Splits
          1. Review Questions MyLab Finance Solutions
      9. Summary
        1. Focus on Value
        2. Review of Learning Goals
      10. Opener-in-Review
      11. Self-Test Problem (Solutions in Appendix)
      12. Warm-Up Exercises All problems are available in MyLab Finance
      13. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
        4. Personal Finance Problem
      14. Spreadsheet Exercise
        1. To Do
  14. Part Seven Short-Term Financial Decisions
    1. Chapter 15 Working Capital and Current Assets Management
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 15.1 Net Working Capital Fundamentals
        1. Working Capital Management
        2. Net Working Capital
        3. Tradeoff between Profitability and Risk
          1. Changes in Current Assets
          2. Changes in Current Liabilities
            1. Review Questions MyLab Finance Solutions
      4. 15.2 Cash Conversion Cycle
        1. Calculating the Cash Conversion Cycle
        2. Funding Requirements of the Cash Conversion Cycle
          1. Permanent versus Seasonal Funding Needs
          2. Aggressive versus Conservative Seasonal Funding Strategies
        3. Strategies for Managing the Cash Conversion Cycle
          1. Review Questions MyLab Finance Solutions
      5. 15.3 Inventory Management
        1. Differing Viewpoints about Inventory Level
        2. Common Techniques for Managing Inventory
          1. ABC System
          2. Economic Order Quantity (EOQ) Model
            1. Mathematical Development of EOQ
            2. Reorder Point
          3. Just-in-Time (JIT) System
          4. Computerized Systems for Resource Control
        3. International Inventory Management
          1. Review Questions MyLab Finance Solutions
      6. 15.4 Accounts Receivable Management
        1. Credit Selection and Standards
          1. Five C’s of Credit
          2. Credit Scoring
          3. Changing Credit Standards
            1. Making the Credit Standard Decision
          4. Managing International Credit
        2. Credit Terms
          1. Early Payment Discount
          2. Early Payment Discount Period
          3. Credit Period
        3. Credit Monitoring
          1. Average Collection Period
          2. Aging of Accounts Receivable
          3. Common Collection Techniques
            1. Review Questions MyLab Finance Solutions
      7. 15.5 Management of Receipts and Disbursements
        1. FLOAT
        2. Speeding Up Collections
        3. Slowing Down Payments
        4. Cash Concentration
        5. Zero-Balance Accounts
        6. Investing in Marketable Securities
          1. Review Questions MyLab Finance Solutions
      8. Summary
        1. Focus On Value
        2. Review of Learning Goals
      9. Opener-in-Review
      10. Self-Test Problems (Solutions in Appendix)
      11. Warm-Up Exercises All problems are available in MyLab Finance
      12. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
      13. Spreadsheet Exercise
        1. To Do
    2. Chapter 16 Current Liabilities Management
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 16.1 Spontaneous Liabilities
        1. Accounts Payable Management
          1. Role in the Cash Conversion Cycle
          2. Analyzing Credit Terms
            1. Taking the Discount
            2. Giving Up the Discount
            3. Using the Cost of Giving Up an Early Payment Discount in Decision Making
          3. Effects of Stretching Accounts Payable
        2. Accruals
          1. Review Questions MyLab Finance Solutions
      4. 16.2 Unsecured Sources of Short-Term Loans
        1. Bank Loans
          1. Loan Interest Rates
            1. Fixed- and Floating-Rate Loans
            2. Method of Computing Interest
          2. Single-Payment Notes
          3. Lines of Credit
            1. Interest Rates 
            2. Operating-Change Restrictions
            3. Compensating Balances
            4. Annual Cleanups
          4. Revolving Credit Agreements
        2. Commercial Paper
          1. Interest on Commercial Paper
        3. International Loans
          1. International Transactions
          2. Financing International Trade
          3. Transactions Between Subsidiaries
            1. Review Questions MyLab Finance Solutions
      5. 16.3 Secured Sources of Short-Term Loans
        1. Characteristics of Secured Short-Term Loans
          1. Collateral and Terms
          2. Institutions Extending Secured Short-Term Loans
        2. Use of Accounts Receivable as Collateral
          1. Pledging Accounts Receivable
            1. The Pledging Process
            2. Notification
            3. Pledging Cost
          2. Factoring Accounts Receivable
            1. Factoring Agreement
            2. Factoring Cost
        3. Use of Inventory as Collateral
          1. Floating Inventory Liens
          2. Trust Receipt Inventory Loans
          3. Warehouse Receipt Loans
            1. Review Questions MyLab Finance Solutions
      6. Summary
        1. Focus on Value
        2. Review of Learning Goals
      7. Opener-in-Review
      8. Self-Test Problem (Solutions in Appendix)
      9. Warm-Up Exercises All problems are available in MyLab Finance
      10. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
      11. Spreadsheet Exercise
        1. To Do
  15. Part Eight Special Topics in Managerial Finance
    1. Chapter 17 Hybrid and Derivative Securities
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 17.1 Overview of Hybrids and Derivatives
        1. Review Question MyLab Finance Solutions
      4. 17.2 Leasing
        1. Types of Leases
          1. Operating Leases
          2. Financial (or Capital) Leases
        2. Leasing Arrangements
        3. Lease-Versus-Purchase Decision
        4. Effects of Leasing on Future Financing
        5. Advantages and Disadvantages of Leasing
          1. Review Questions MyLab Finance Solutions
      5. 17.3 Convertible Securities
        1. Types of Convertible Securities
          1. Convertible Bonds
          2. Convertible Preferred Stock
        2. General Features of Convertibles
          1. Conversion Ratio
          2. Conversion (or Stock) Value
          3. Effect on Earnings per Share
        3. Financing with Convertibles
          1. Motives for Convertible Financing
          2. Other Considerations
        4. Determining the Value of a Convertible Bond
          1. Straight Bond Value
          2. Conversion (or Stock) Value
          3. Market Value
            1. Review Questions MyLab Finance Solutions
      6. 17.4 Stock Purchase Warrants
        1. Key Characteristics
          1. Exercise Prices
          2. Warrant Trading
          3. Comparison of Warrants to Rights and Convertibles
        2. Implied Price of an Attached Warrant
        3. Values of Warrants
          1. Theoretical Value of a Warrant
          2. Market Value of a Warrant
          3. Warrant Premium
            1. Review Questions MyLab Finance Solutions
      7. 17.5 Options
        1. Calls and Puts
        2. Options Markets
        3. Options Trading
        4. Role of Call and Put Options in Fund Raising
        5. Hedging Foreign-Currency Exposures with Options
          1. Review Questions MyLab Finance Solutions
      8. Summary
        1. Focus on Value
        2. Review of Learning Goals
      9. Opener-in-Review
      10. Self-Test Problems (Solutions in Appendix)
      11. Warm-Up Exercises All problems are available in MyLab Finance
      12. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
        3. Personal Finance Problem
        4. Personal Finance Problem
        5. Personal Finance Problem
      13. Spreadsheet Exercise
        1. To Do
    2. Chapter 18 Mergers, LBOs, Divestitures, and Business Failure
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 18.1 Merger Fundamentals
        1. Terminology
          1. Mergers, Consolidations, and Holding Companies
          2. Acquiring Versus Target Companies
          3. Friendly Versus Hostile Takeovers
          4. Strategic Versus Financial Mergers
        2. Motives For Merging
          1. Growth or Diversification
          2. Synergies
          3. Fund Raising
          4. Increased Managerial Skill or Technology
          5. Tax Considerations
          6. Increased Ownership Liquidity
          7. Defense Against Takeover
        3. Types of Mergers
          1. Review Questions MyLab Finance Solutions
      4. 18.2 LBOs and Divestitures
        1. Leveraged Buyouts (Lbos)
        2. Divestitures
          1. Review Questions MyLab Finance Solutions
      5. 18.3 Analyzing and Negotiating Mergers
        1. Valuing The Target Company
          1. Acquisitions of Assets
          2. Acquisitions of Going Concerns
        2. Stock Swap Transactions
          1. Ratio of Exchange
          2. Effect on Earnings per Share
            1. Initial Effect
            2. Long-Run Effect
          3. Effect on Market Price per Share
        3. Merger Negotiation Process
          1. Management Negotiations
          2. Tender Offers
          3. Fighting Hostile Takeovers
        4. Holding Companies
          1. Advantages of Holding Companies
          2. Disadvantages of Holding Companies
        5. International Mergers
          1. Changes in Western Europe
          2. Foreign Takeovers of U.S. Companies
            1. Review Questions MyLab Finance Solutions
      6. 18.4 Business Failure Fundamentals
        1. Types of Business Failure
        2. Major Causes of Business Failure
        3. Voluntary Settlements
          1. Voluntary Settlement to Sustain the Firm
          2. Voluntary Settlement Resulting in Liquidation
            1. Review Questions MyLab Finance Solutions
      7. 18.5 Reorganization and Liquidation in Bankruptcy
        1. Bankruptcy Legislation
        2. Reorganization in Bankruptcy (Chapter 11)
          1. Procedures
          2. Role of the Debtor in Possession (DIP)
        3. Liquidation in Bankruptcy (Chapter 7)
          1. Procedures
          2. Priority of Claims
          3. Final Accounting
            1. Review Questions MyLab Finance Solutions
      8. Summary
        1. Focus on Value
        2. Review of Learning Goals
      9. Opener-in-Review
      10. Self-Test Problems (Solutions in Appendix)
      11. Warm-Up Exercises All problems are available in MyLab Finance
      12. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
        1. Personal Finance Problem
        2. Personal Finance Problem
      13. Spreadsheet Exercise
        1. To Do
    3. Chapter 19 International Managerial Finance
      1. Learning Goals
      2. Why this Chapter Matters to You
        1. In Your Professional Life
          1. Accounting
          2. Information Systems
          3. Management
          4. Marketing
          5. Operations
        2. In Your Personal Life
      3. 19.1 The Multinational Company and Its Environment
        1. Key Trading Blocs
        2. Gatt and the WTO
        3. Legal Forms of Business Organization
        4. Taxes
          1. Tax Rates and Taxable Income
          2. Tax Rules
        5. Financial Markets
          1. Growth of the Euromarket
          2. Major Participants
            1. Review Questions MyLab Finance Solutions
      4. 19.2 Financial Statements
        1. Subsidiary Characterization and Functional Currency
        2. Translation of Individual Accounts
          1. FASB No. 52
          2. Temporal Method
            1. Review Question MyLab Finance Solution
      5. 19.3 Risk
        1. Exchange Rate Risks
          1. Relationships among Currencies
          2. What Causes Exchange Rates to Change?
          3. Impact of Currency Fluctuations
        2. Political Risks
          1. Review Questions MyLab Finance Solutions
      6. 19.4 Long-Term Investment and Financing Decisions
        1. Foreign Direct Investment
        2. Investment Cash Flows and Decisions
        3. Capital Structure
          1. International Capital Markets
          2. International Diversification
          3. Country Factors
        4. Long-Term Debt
          1. International Bonds
          2. The Role of International Financial Institutions
          3. Changing the Structure of Debt
        5. Equity Capital
          1. Equity Issues and Markets
          2. Joint Ventures
            1. Review Questions MyLab Finance Solutions
      7. 19.5 Short-Term Financial Decisions
        1. Cash Management
          1. Hedging Strategies
          2. Adjustments in Operations
        2. Credit and Inventory Management
          1. Review Questions MyLab Finance Solutions
      8. 19.6 Mergers and Joint Ventures
        1. Review Question MyLab Finance Solutions
      9. Summary
        1. Focus on Value
        2. Review of Learning Goals
      10. Opener-in-Review
      11. Self-Test Problem (Solution in Appendix)
      12. Warm-Up Exercises All problems are available in MyLab Finance
      13. Problems All problems are available in MyLab Finance. The icon indicates problems in Excel format available in MyLab Finance.
      14. Personal Finance Problem
      15. Personal Finance Problem
      16. Spreadsheet Exercise
        1. To Do
  16. Appendix Solutions to Self-Test Problems
  17. Glossary
  18. Frequently Used Symbols and Abbreviations

Product Information

  • Title: Principles of Managerial Finance, 15/e
  • Author(s): Chad J. Zutter, Scott B. Smart
  • Release date: January 2018
  • Publisher(s): Pearson
  • ISBN: 9780134476315