Understanding Financial Management: A Practical Guide

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John Wiley & Sons, Feb 9, 2009 - Business & Economics - 504 pages
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Designed for those who want to gain an understanding of the fundamental concepts and techniques used in financial management. An underlying premise of the book is that the objective of the firm is to maximize value or wealth. Drawing on a wealth of experience in the academic and professional worlds, the authors discuss how firms can accomplish this objective by making appropriate investment and financing decisions.

Bridging the gap between financial theory and practice, the authors present fundamental concepts in an intuitive and nontechnical way, and provide numerous practical financial tips to readers. The focus is on current practice, using results from recent surveys to show the most popular techniques and approaches used by financial managers today.

A range of instructor’s resources are available at the accompanying website. Visit www.blackwellpublishing.com/baker for full details.

 

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Contents

PART I The Foundation
1
Chapter 1 Introduction to Financial Management
3
11 Financial Management and the Financial Manager
4
12 Corporate Form of Business Organization
8
13 The Goal of Financial Management
10
14 Accounting Profit versus Economic Profit
12
15 The Agency Relationship
14
16 Organization of the Book
15
75 Cash Flow Components
205
76 Tax Effects of Selling Depreciable Assets
214
77 Applying Cash Flow Analysis
217
78 Capital Budgeting for the Multinational Corporation
221
Chapter 8 Capital Budgeting
227
81 Project Classifications and Analysis
228
82 Net Present Value
230
83 Profitability Index
235

Chapter 2 Interpreting Financial Statements
18
22 Balance Sheet
20
23 Income Statement
25
24 Statement of Cash Flows
31
25 Statement of Retained Earnings
35
27 Notes to Financial Statements
39
28 Quality of Earnings
40
29 Other Issues
41
Chapter 3 Interpreting Financial Ratios
45
31 Financial Ratio Analysis
46
32 Liquidity Ratios
47
33 Debt Management Ratios
52
34 Asset Management Ratios
56
35 Profitability Ratios
61
36 Market Value Ratios
66
37 Uses of Financial Ratios
69
38 Limitations of Financial Ratio Analysis
70
Chapter 4 The Time Value of Money
73
41 Central Concepts in Finance
74
42 Future Value of a Present Amount
75
43 Present Value of a Future Amount
80
44 Future Value of an Annuity
83
45 Present Value of an Annuity
86
46 Present Value of a Perpetuity
91
48 Nominal and Effective Interest Rates
94
49 Solving for an Unknown Interest Rate
95
410 Other Time Value Applications
98
Chapter 5 Valuation
103
51 Valuation Fundamentals
104
52 Bond Characteristics and Features
110
53 Bond Valuation
115
54 Bond Pricing Relationships
121
55 Interest Rate Risk
126
56 Bond Yields
129
57 Bond Trading and Price Reporting
134
58 Preferred Stock Features and Valuation
136
59 Common Stock Characteristics and Features
140
510 Common Stock Valuation
142
PART II Working Capital Management Decisions
155
Chapter 6 Working Capital Management
157
61 Introduction to Working Capital Management
158
62 Approaches to Working Capital Management
159
63 Operating and Cash Conversion Cycles
163
64 Cash Management
165
65 Accounts Receivable Management
177
66 Inventory Management
181
PART III Longterm Investment Decisions
189
Chapter 7 Capital Investments and Cash Flow Analysis
191
71 Capital Investment Decisions
192
72 Project Classifications
194
73 Capital Budgeting Process
195
74 Guidelines for Estimating Project Cash Flows
199
84 Internal Rate of Return
238
85 Modified Internal Rate of Return
242
86 Payback Period
246
87 Discounted Payback Period
250
88 Summary of Capital Budgeting Techniques
252
89 Mutually Exclusive Project Decisions
254
810 Capital Rationing Decisions
269
811 Capital Budgeting Techniques in Theory and Practice
272
Chapter 9 Risk Analysis
278
91 Types of Risk in Capital Budgeting
279
92 Assessing SingleProject Risk
285
93 Assessing Market Risk
294
94 Adjusting for Risk
302
95 Risk Analysis in Multinational Corporations
313
96 Risk Analysis in Theory and Practice
315
PART IV Longterm Financing Decisions
321
Chapter 10 Raising Funds and Cost of Capital
323
101 Financial Markets
324
102 Investment Banks
327
103 The Decision to Go Public
328
104 Different Methods of Issuing New Securities
331
105 Public Offer
335
106 Private Placement
339
107 Costs of Issuing New Securities
341
108 Cost of Capital Concept
342
109 Cost of Capital Components
345
1010 Weighted Average Cost of Capital
358
1011 Marginal Cost of Capital
361
Chapter 11 Capital Structure
369
111 The Financing Mix
370
112 Understanding Financial Risk
371
113 Capital Structure and the Value of the Firm
375
114 The ModiglianiMiller Theorem with Corporate Taxes
381
115 The Costs of Financial Distress
386
116 Tradeoff Theory of Optimal Capital Structure
388
117 Pecking Order Theory of Capital Structure
391
118 Stakeholder Theory of Capital Structure
394
119 Capital Structure in Practice
396
1110 Bankruptcy
397
Chapter 12 Dividend Policy
401
121 Dividends and Dividend Policy
402
122 The Dividend Puzzle
407
123 Factors Influencing the Dividend Decision
417
124 Dividend Policies
423
125 Stock Repurchases
429
126 Cash Dividends versus Stock Repurchases
434
127 Dividend Reinvestment Plans
436
128 Stock Dividends
440
129 Stock Splits and Reverse Splits
446
Glossary
453
Index
469
Copyright

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About the author (2009)

H. Kent Baker, University Professor of Finance, is the author of more than 150 articles for academic and professional journals including the Journal of Finance, Financial Management, The Financial Review, Journal of Financial Research, the Journal of Economics and Business, Harvard Business Review and many others.


Gary E. Powell is an Associate Professor of Finance at Towson University.

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