Financial Management

Description

For courses in Corporate Finance

A balanced overview of financial management theory and practice

Finance is one of the key drivers of a firm’s activities, and a critical component to understanding business in general. Financial Management: Concepts and Applications is designed to help students with no prior knowledge grasp the applications and relevance of finance. Author Stephen Foerster reveals the practical side of finance, rather than just its theoretical concepts, and shows how finance intersects with many other areas of business. Thoroughly integrated with the text, MyFinanceLab places personalized practice opportunities just a few clicks away and provides a truly interactive learning experience.

This program provides a better teaching and learning experience—for you and your students. It will help you to:

• Personalize learning with MyFinanceLab: This online homework, tutorial, and assessment program provides students the help they need, when they need it, and allows unlimited practice.
• Encourage students to focus on the big picture: A thematic approach helps students achieve a holistic view of how finance impacts many aspects of business.
• Highlight applications of finance: A strong emphasis on applications helps students see the relevance of finance, and keeps them interested in the course.
• Foster thorough understanding via learning aids: Various tools, throughout the text and at the end of each chapter, support students as they learn and review.

Note: If you are purchasing the standalone text or electronic version, MyFinanceLab does not come automatically packaged with the text. To purchase MyFinanceLab please visit www.myfinancelab.com or you can purchase a package of the physical text + MyFinanceLab by searching for 0133578089 / 9780133578089. MyFinanceLab¿ is not a self-paced technology and should only be purchased when required by an instructor.For courses in Corporate Finance

A balanced overview of financial management theory and practice

Finance is one of the key drivers of a firm’s activities, and a critical component to understanding business in general. Financial Management: Concepts and Applications is designed to help students with no prior knowledge grasp the applications and relevance of finance. Author Stephen Foerster reveals the practical side of finance, rather than just its theoretical concepts, and shows how finance intersects with many other areas of business. Thoroughly integrated with the text, MyFinanceLab places personalized practice opportunities just a few clicks away and provides a truly interactive learning experience.

This program provides a better teaching and learning experience—for you and your students. It will help you to:

• Personalize learning with MyFinanceLab: This online homework, tutorial, and assessment program provides students the help they need, when they need it, and allows unlimited practice.
• Encourage students to focus on the big picture: A thematic approach helps students achieve a holistic view of how finance impacts many aspects of business.
• Highlight applications of finance: A strong emphasis on applications helps students see the relevance of finance, and keeps them interested in the course.
• Foster thorough understanding via learning aids: Various tools, throughout the text and at the end of each chapter, support students as they learn and review.

Personalize learning with MyFinanceLab

A fully functional financial calculator inside MyFinanceLab enables students to complete complex calculations with ease. In addition, a financial calculator app is available at no additional charge with students’ MyFinanceLab subscription.

The new MyFinanceLab Video Series explains key topics in finance. Videos–on topics such as default risk, market efficiency, and diversification–bring key course material to life.

Taken directly from the text’s end-of-chapter exercises, MyFinanceLab’s exercises are enhanced with algorithmically generated values. This enables students to work the exercises over and over again with new values for additional practice. Instructors may assign the same exercises as homework, quizzes, or tests and know that students will be working with different values.

MyFinanceLab contains a number of tutorial tools and learning aids that give students the help they need when they need it. Exercises provide step-by-step instruction, input-specific feedback, and hints, and may link to spreadsheets, sample problems, or the exact spot in the eText that addresses the learning objective of the problem.

A personalized study plan is generated for each student when pre-loaded sample tests are taken. Instructors can view the students’ study plans from the Gradebook and use the mastery icons to see how they’re doing on their own.

A powerful homework and test manager lets instructors choose which exercises to assign, optionally allow partial credit on multipart exercises, and control when assignments are due.

The MyFinanceLab Gradebook records student performance on practice, homework, quizzes, and tests and allows you to weight assignments. MyFinanceLab provides a spreadsheet-style grade book for easier sorting.

The MyFinanceLab Announcement Manager helps you keep your students on track. The home page shows students “what’s due” reminders and gives instructors the power to post announcements in Coordinator Courses that automatically display in Member Courses. You can reorder announcements and set start and end times for each announcement.

Encourage students to focus on the big picture

A unique framework provides a unifying financial management theme throughout the text. At the beginning of each chapter, the relationship between the concepts in the chapter and the unifying theme is explored. This approach helps students keep an eye on the forest rather than getting lost in the trees.

A comprehensive case study at the end of the text summarizes the major concepts addressed throughout the book and reflects the unifying theme. The last chapter focuses on well-known retail giant, Wal-Mart Stores, Inc., and shows how the concepts introduced in the book can be applied to assess Walmart’s performance and to identify ways in which Walmart can create value for its shareholders.

Highlight applications of finance

In order to make sure students gain as much practical knowledge as possible, the text emphasizes the applications of concepts. Examples relating to Home Depot, Inc., the world’s largest home improvement retailer, are presented throughout. For example, after cost of capital is discussed, the text shows how to estimate Home Depot’s cost of capital. Examples pertaining to other firms and situations are included where relevant. Much of this information is conveyed visually via charts, exhibits, and tables.

The text highlights the relevance of principles of finance to practicing managers, both in finance and in other areas. A summary section in each chapter highlights the relevance of the concepts and ideas presented, as well as the key takeaways for managers.

Foster thorough understanding via learning aids

A collection of learning tools throughout the text helps students stay on track:
          • Self-study questions in each chapter summarize the key concepts covered in the chapter. Solutions are provided in MyFinanceLab.
          • Present value tables at the end of the book enable students to calculate values.
          • A glossary of key terms at the end of the text serves as a helpful reference for students as they work through the material. Brief TOC

1. Overview of Financial Management
2. Sizing Up a Business: A Non-Financial Perspective
3. Understanding Financial Statements
4. Measuring Financial Performance
5. Managing Day-To-Day Cash Flow
6. Projecting Financial Requirements and Managing Growth
7. Time Value of Money Basics and Applications
8. Making Investment Decisions
9. Overview of Capital Markets: Long-Term Financing Instruments
10. Assessing the Cost of Capital: What Investors Require
11. Understanding Financing and Payout Decisions
12. Designing an Optimal Capital Structure
13. Measuring and Creating Value
14. Comprehensive Case Study: Wal-Mart Stores, Inc.

Comprehensive TOC

1. Overview of Financial Management

• 1.1: Financial Management and the Cash Flow Cycle
• 1.2: The Role of Financial Managers
• 1.3: A Non-Financial Perspective of Financial Management
• 1.4: Financial Management’s Relationship with Accounting and Other Disciplines
• 1.5: Types of Firms
• 1.6: A Financial Management Framework
• 1.7: Relevance for Managers
• 1.8: Summary
• 1.9: Additional Readings
• 1.10: End of Chapter Problems

2. Sizing Up a Business: A Non-Financial Perspective

• 2.1: Sizing Up The Overall Economy

o 2.1.1: GDP Components
o 2.1.2: Sector-Related Fluctuations
o 2.1.3:  Inflation and Interest Rates
o 2.1.4: Capital Markets
o 2.1.5: Economic Size-Up Checklist

• 2.2: Sizing Up the Industry

o 2.2.1: Industry Life Cycles
o 2.2.2: The Competitive Environment
o 2.2.3: Opportunities and Risks
o 2.2.4: Industry Size-up Checklist

• 2.3: Sizing Up Operations Management and Supply Risk
• 2.4: Sizing Up Marketing Management and Demand Risk
• 2.5: Sizing Up Human Resource Management and Strategy
• 2.6: Sizing Up Home Depot: An Example
• 2.7: Relevance for Managers
• 2.8 Summary
• 2.9: Additional Readings and Information
• 2.10: End of Chapter Problems

3. Understanding Financial Statements

• 3.1: Understanding Balance Sheets

o 3.1.1: Understanding Assets
o 3.1.2: Understanding Liabilities
o 3.1.3: Understanding Equity

• 3.2: Understanding Income Statements

o 3.2.1: Understanding Revenues, Costs, Expenses, and Profits
o 3.2.2: Connecting a Firm’s Income Statement and Balance Sheet

• 3.3: Understanding Cash Flow Statements

o 3.3.1: Cash Flows Related to Operating Activities
o 3.3.2: Cash Flows from Investing Activities
o 3.3.3: Cash Flows from Financing Activities

• 3.4: Relevance for Managers
• 3.5: Summary
• 3.6: Additional Readings and Sources of Information
• 3.7: End of Chapter Problems

4. Measuring Financial Performance

• 4.1: Performance Measures

o 4.1.1: Return on Equity
o 4.1.2: Profitability Measures
o 4.1.3: Resource Management Measures
o 4.1.4: Liquidity Measures
o 4.1.5: Leverage Measures
o 4.1.6: Application: Home Depot

• 4.2: Reading Annual Reports
• 4.3: Relevance for Managers
• 4.4: Summary
• 4.5: Additional Readings and Sources of Information
• 4.6: End of Chapter Problems

5. Managing Day-To-Day Cash Flow

• 5.1: Cash Flow Cycles

• 5.2: Working Capital Management

o 5.2.1: Managing Inventory
o 5.2.2: Managing Accounts Receivable
o 5.2.3: Managing Accounts Payable
o 5.2.4: Application: Home Depot

• 5.2.4.1: Orange Computers and Little Orange Computers
• 5.2.4.2: Home Depot

• 5.3: Short-Term Financing

o 5.3.1: Bank Loans
o 5.3.2: Commercial Paper
o 5.3.3: Banker’s Acceptance

• 5.4: Relevance for Managers
• 5.5: Summary
• 5.6: Additional Readings
• 5.7: End of Chapter Problems

6. Projecting Financial Requirements and Managing Growth

• 6.1: Generating Pro Forma Income Statements

o 6.1.1: Establishing the Cost of Goods Sold and Gross Profit
o 6.1.2: Establishing Expenses
o 6.1.3: Establishing Earnings

• 6.2: Generating Pro Forma Balance Sheets

o 6.2.1: Establishing Assets
o 6.2.2: Establishing Liabilities and Equity

• 6.3: Generating Pro Forma Cash Budgets

o 6.3.1: Establishing Cash Inflows
o 6.3.2: Establishing Cash Outflows
o 6.3.3: Establishing Net Cash Flows

• 6.4: Performing Sensitivity Analysis

o 6.4.1: Sales Sensitivity
o 6.4.1: Interest Rate Sensitivity
o 6.4.3: Working Capital Sensitivity

• 6.5: Understanding Sustainable Growth and Managing Growth
• 6.6: Relevance for Managers
• 6.7: Summary
• 6.8: Additional Readings and Resources
• 6.9: Problems

7. Time Value of Money Basics and Applications

• 7.1: Exploring Time Value of Money Concepts

o 7.1.1: Future Values
o 7.1.2: Present Values
o 7.1.3: Annuities
o 7.1.4: Perpetuities

• 7.2: Applying Time Value of Money Concepts to Financial Securities

o 7.2.1: Bonds
o 7.2.2: Preferred Shares
o 7.2.3: Common Equity

• 7.3: Relevance for Managers
• 7.4: Summary
• 7.5: Additional Readings
• 7.6: End of Chapter Problems

8. Making Investment Decisions

• 8.1: Understanding the Decision-Making Process
• 8.2: Capital Budgeting Techniques

o 8.2.1: Payback

• 8.2.1.1: Strengths and Weaknesses of the Payback Method

o 8.2.2: Net Present Value

• 8.2.2.1: Strengths and Weaknesses of the Net Present Value Method

o 8.2.3: Internal Rate of Return

• 8.2.3.1: Strengths and Weaknesses of the Internal Rate of Return Method
• 8.2.3.2: Modified Internal Rate of Return

• 8.3: Capital Budgeting Extensions

o 8.3.1: Profitability Index
o 8.3.2: Equivalent Annual Cost and Project Lengths
o 8.3.3: Mutually Exclusive Projects and Capital Rationing

• 8.4: Relevance for Managers
• 8.5: Summary
• 8.6: Additional Readings
• 8.7: End of Chapter Problems

9. Overview of Capital Markets: Long-Term Financing Instruments

• 9.1: Bonds

o 9.1.1: Changing Bond Yields
o 9.1.2: Bond Features
o 9.1.3: Bond Ratings

• 9.2: Preferred Shares
• 9.3: Common Shares

o 9.3.1: Historical Returns

• 9.4: Capital Markets Overview

o 9.4.1: Private versus Public Markets
o 9.4.2: Venture Capital and Private Equity
o 9.4.3: Initial Offerings versus Seasoned Issues
o 9.4.4: Organized Exchanges versus Over-The-Counter Markets
o 9.4.5: Role of Intermediaries

• 9.5: Market Efficiency

o 9.5.1: Weak Form
o 9.5.2: Semi-strong Form
o 9.5.3: Strong Form
o 9.5.4: U.S. Stock Market Efficiency

• 9.6: Relevance for Managers
• Appendix: Understanding Bond and Stock Investment Information
• 9.7: Summary
• 9.8: Additional Readings
• 9.9: End of Chapter Problems

10. Assessing the Cost of Capital: What Investors Require

• 10.1: Understanding the Cost of Capital: An Example
• 10.2: Understanding the Implications of the Cost of Capital
• 10.3: Defining Risk
• 10.4: Estimating the Cost of Debt
• 10.5: Estimating the Cost of Preferred Shares
• 10.6: Estimating the Cost of Equity

o 10.6.1: Dividend Model Approach
o 10.6.2: Capital Asset Pricing Model

• 10.6.2.1: Risk-Free Rate
• 10.6.2.2: Market Risk Premium
• 10.6.2.3: Beta

• 10.7: Estimating Component Weights
• 10.8: Home Depot Application
• 10.9: Hurdle Rates
• 10.10: Relevance for Managers
• 10.11: Summary
• 10.12: Additional Readings
• 10.13: Problems

11. Understanding Financing and Payout Decisions

• 11.1: Capital Structure Overview
• 11.2: Understanding the Modigliani-Miller Argument: Why Capital Structure Does Not Matter
• 11.3: Relaxing the Assumptions: Why Capital Structure Does Matter

o 11.3.1: Understanding the Impact of Corporate Taxes
o 11.3.2: Understanding the Impact of Financial Distress
o 11.3.3: Combining Corporate Taxes and Financial Distress Costs
o 11.3.4: Impact of Asymmetric Information

• 11.4: Understanding Payout Policies

o 11.4.1: Paying Dividends
o 11.4.2: Repurchasing Shares
o 11.4.3: Do Dividend Policies Matter?

• 11.5: Relevance for Managers
• 11.6: Summary
• 11.7: Additional Resources
• 11.8: End of Chapter Problems
• Appendix: Why Dividend Policy Doesn’t Matter: Example

12. Designing an Optimal Capital Structure

• 12.1: Factor Affecting Financing Decisions: The FIRST Approach

o 12.1.1: Maximizing Flexibility
o 12.1.2: Impact on EPS: Minimizing Cost

• 12.1.2.1: A Simple Valuation Model
• 12.1.2.2: Earnings before Interest and Taxes Break-Even: What Leverage Really Means
• 12.1.2.3: Does Issuing Equity Dilute the Value of Existing Shares?

o 12.1.3: Minimizing Risk
o 12.1.4: Maintaining Shareholder Control
o 12.1.5: Optimal Training

• 12.2: Tradeoff Assessment: Evaluating FIRST Criteria
• 12.3: Relevance for Managers
• 12.4: Summary
• 12.5: Additional Resource
• 12.6: End of Chapter Problems

13.  Measuring and Creating Value

• 13.1: An Overview of Measuring and Creating Value
• 13.2: Measuring Value: The Book Value Plus Adjustments Method

o 13.2.1: Pros and Cons of the Book Value of Equity Plus Adjustments Method

• 13.3: Measuring Value: The Discount Cash Flow Analysis Method

o 13.3.1: Estimating Free Cash Flows
o 13.3.2: Estimating the Cost of Capital
o 13.3.3: Estimating the Present Value of Free Cash Flows
o 13.3.4: Estimating the Terminal Value
o 13.3.5: Estimating the Value of Equity
o 13.3.6: Pros and Cons of the Free Cash Flow to the Firm Approach

• 13.4: Measuring Value: Relative Valuations and Comparable Analysis

o 13.4.1: The Price-Earnings Method

• 13.4.1.1: Pros and Cons of the Price-Earnings Approach

o 13.4.2: The Enterprise Value-to-EBITDA Method

• 13.4.2.1: Pros and Cons of the EV/EBITDA Approach

• 13.5: Creating Value and Value-Based Management
• 13.6: Valuing Mergers and Acquisitions

o 13.6.1: Valuing Comparable M&A Transactions

• 13.7: Relevance for Managers
• 13.8: Summary
• 13.9: Additional Readings
• 13.10: End of Chapter Problems

14. Comprehensive Case Study: Wal-Mart Stores, Inc.

• 14.1: Sizing Up Wal-Mart

o 14.1.1: Analyzing the Economy
o 14.1.2: Analyzing the Industry
o 14.1.3: Analyzing Walmart’s Strengths and Weaknesses in Operations, Marketing, Management, and Strategy

• 14.1.3.1: Analyzing Walmart’s Operations
• 14.1.3.2: Analyzing Walmart’s Marketing
• 14.1.3.3: Analyzing Walmart’s Management and Strategy

o 14.1.4: Analyzing Walmart’s Financial Health

• 14.2: Projecting Walmart’s Future Performance

o 14.2.1: Projecting Walmart’s Income Statement
o 14.2.2: Projecting Walmart’s Balance Sheet
o 14.2.3: Examining Alternate Scenarios

• 14.3: Assessing Walmart’s Long-Term Investing and Financing

o 14.3.1: Assessing Walmart’s Investments
o 14.3.2: Assessing Walmart’s Capital Raising and the Cost of Capital

• 14.4: Valuing Walmart

o 14.4.1: Measuring Walmart’s Economic Value Added
o 14.4.2: Estimating Walmart’s Intrinsic Value: The DCF Approach
o 14.4.3: Estimating Walmart’s Intrinsic Value: Comparable Analysis
o 14.4.4: Creating Value and Overall Assessment of Walmart

• 14.5: Relevance for Managers and Final Comments
• 14.6: Additional Readings and Sources of Information
• 14.7: End of Chapter Problems

Additional information

Dimensions	0.80 × 7.90 × 9.90 in
Imprint	Pearson
Format	gen
ISBN-13	09780132936644
ISBN-10	013293664X
Author	Stephen Foerster
BISAC	BUS027000
Subjects	finance, higher education, BUS027000, business and economics, Quantitative Business, Graduate Corporate Finance