British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
ISBN-13 978-0-470-09225-5 (PB)
ISBN-10 0-470-09225-4 (PB)


Foreword by Richard Roll xvi
Preface xviii
List of frequently used symbols xxii
1 What is corporate finance? 1
Section I
Financial analysis 15
Part One
Fundamental concepts in
financial analysis 17
2 Cash flows 19
3 Earnings 29
4 Capital employed and invested
capital 44
5 Walking through from earnings to
cash flow 57
6 Getting to grips with consolidated
accounts 73
7 How to cope with the most complex
points in financial accounts 94
Part Two
Financial analysis and
forecasting 121
8 How to perform a financial
analysis 123
9 Margin analysis: Structure 155
10 Margin analysis: Risks 178
11 Working capital and capital
expenditures 193
12 Financing 217
13 Return on capital employed and
return on equity 232
14 Conclusion of financial analysis 252
Section II
Investment analysis 259
Part One
Investment decision rules 261
15 The financial markets 263
16 The time value of money and Net
Present Value (NPV) 290
17 The Internal Rate of Return (IRR) 309
18 Incremental cash flows and other
investment criteria 327
19 Measuring value creation 345
20 Risk and investment analysis 367
Part Two
The risk of securities and the
cost of capital 385
21 Risk and return 38722 The cost of equity 419
23 From the cost of equity to the
cost of capital 443
24 The term structure of interest
rates 461
Section III
Corporate financial
policies 473
Part One
Financial securities 475
25 Enterprise value and financial
securities 477
26 Debt securities 485
27 Managing net debt 512
28 Shares 538
29 Options 556
30 Hybrid securities 577
31 Selling securities 601
Part Two
Capital structure policies 635
32 Value and corporate finance 637
33 Capital structure and the theory
of perfect capital markets 657
34 The tradeoff model 668
35 Debt, equity and options theory 698
36 Working out details: The design
of the capital structure 716
Part Three
Equity capital and dividend
policies 753
37 Internal financing: Reinvesting cash
flow 755
38 Returning cash to shareholders:
Dividend policies 768
39 Capital increases 792
Section IV
Financial management 809
Part One
Valuation and financial
engineering 811
40 Valuation 813
41 Choice of corporate structure 844
42 Taking control of a company 873
43 Mergers and demergers 894
44 Leveraged buyouts (LBOs) 912
45 Bankruptcy and restructuring 923
Part Two
Managing net debt and
financial risks 937
46 Managing cash flows 939
47 Asset-based financing 956
48 Managing financial risks 972
Glossary 992