Parts of the Text Part One, Introduction. Chapter 1 discusses the goal and objective of financial manage- ment, introduces the various forms of business organization, discusses the importance of ethical business practices, and reviews the structure of the financial management func- tion. Chapter 2 reviews the major elements of the U.S. and international financial mar- ketplace. It includes a discussion of the structure of the U.S. financial system and the role of stock exchanges. Also included are introductions to various types of derivative securi- ties and international financial management. Chapter 2 also contains an extensive discus- sion of the causes and impacts of the financial crisis beginning in 2007–2008. Chapter 3 considers the financial statements and ratios that can be used to evaluate the financial performance of a firm. Chapter 4 presents various techniques for analyzing cash flows and forecasting future financial performance. Part Two, Determinants of Valuation. Valuation is a central theme of the book. Chap- ter 5 develops the concept of the time value of money. This concept is used in the valu- ation of securities and the evaluation of investment projects expected to provide benefits over a number of years. The present value rule is also introduced. Chapter 6 applies the basic valuation model to fixed income securities, such as bonds and preferred stock. Chapter 7 deals with the valuation of common stock and the role of investment bankers. Chapter 8 provides a comprehensive introduction to the concept of risk in finance and the relationship between risk, required return, and the shareholder wealth maximization goal of the firm. Part Three, The Capital Investment Decision. This portion of the text focuses on capi- tal expenditures — that is, investments in long-term assets. Chapters 9 and 10 present the fundamentals of capital budgeting, namely, the process of investing in long-term assets. Chapter 9 deals with the measurement of the cash flows (benefits and costs) associated with long-term investment projects. Chapter 10 considers various decision-making crite- ria that can be used when choosing projects that will maximize the value of the firm. Chapter 11 extends the concepts developed in Chapter 10 by considering some of the decision-making techniques that attempt to deal with the problem of the risk associated with a specific project’s cash flows. Part Four, The Cost of Capital, Capital Structure, and Dividend Policy. Chapter 12 illustrates the principles of measuring a firm’s cost of capital. The cost of funds to a firm is an important input in the capital budgeting process. Chapters 13 and 14 address the relationship of the cost of capital to the firm’s capital structure. Chapter 15 discusses the factors that influence the choice of a dividend policy and the impact of various divi- dend policies on the value of a firm. Part Five, Working Capital Management. Chapters 16 through 18 examine the man- agement of a firm’ s current asset and liability accounts —
that is, net working capital. Chapter 16 provides an overview of working capital management, with emphasis on the risk-return trade-offs involved in working capital decision making. Chapter 16 also cov- ers the management of secured and unsecured short-term credit. Chapter 17 deals with the management of cash and marketable securities, and Chapter 18 focuses on the man- agement of accounts receivable and inventories. Part Six, Additional Topics in Contemporary Financial Management. Chapter 19 deals with lease financing and intermediate-term credit. Chapter 20 focuses on option- related funding alternatives, i.e., derivative securities, including convertible securities, and warrants. Chapter 21 examines various techniques for managing risk, including theuse of derivative securities. Chapter 22 discusses the factors that affect exchange rates and foreign exchange risk. Chapter 23 examines corporate restructuring decisions, including mergers and acquisitions, the role of private equity investors, bankruptcy, and reorganization.
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