Introduction to Corporate Finance : Managing Canadian Firms in a Global Environment

Introduction to Corporate Finance : Managing Canadian Firms in a Global Environment

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  • 言語 ENG,ENG
  • 商品コード 9780470837801
  • DDC分類 658.15

Table of Contents

  PART 1 THE FINANCIAL ENVIRONMENT                 1  (54)
Chapter 1 An Introduction to Finance 2 (24)
1.1 Real versus Financial Assets 4 (5)
Canada's Balance Sheet 4 (1)
Real Assets 5 (1)
Financial Assets 5 (2)
Households 7 (2)
1.2 The Financial System 9 (6)
Overview 9 (1)
Channels of Intermediation 9 (2)
Intermediaries 11 (2)
The Major Borrowers 13 (2)
1.3 Financial Instruments and Markets 15 (4)
Financial Instruments 15 (1)
Financial Markets 16 (3)
1.4 The Global Financial Community 19 (3)
Global Financial Markets 20 (2)
1.5 The Structure of This Text 22 (4)
Summary 23 (3)
Chapter 2 Business (Corporate) Finance 26 (29)
2.1 Types of Business Organizations 28 (7)
Sole Proprietorships 28 (1)
Partnerships 29 (2)
Trusts 31 (2)
Corporations 33 (2)
2.2 The Goals of the Corporation 35 (3)
2.3 The Role of Management and Agency 38 (5)
Issues
2.4 Corporate Finance 43 (2)
2.5 Finance Careers and the Organization 45 (10)
of the Finance Function
Summary 50 (5)
PART 2 FINANCIAL ANALYSIS TOOLS 55 (102)
Chapter 3 Financial Statements 56 (42)
3.1 Accounting Principles 58 (4)
The Impact of Recent Accounting Scandals 60 (2)
3.2 Organizing a Firm's Transactions 62 (4)
Bookkeeping 62 (3)
Accounting Conventions: The Basic 65 (1)
Principles
3.3 Preparing Accounting Statements 66 (9)
The Balance Sheet and the Income 66 (2)
Statement
Changing Accounting Assumptions 68 (2)
Tax Statements 70 (1)
Cash Flow Statements 71 (4)
3.4 Rothmans Inc. Accounting Statements 75 (8)
Accompanying Statements 75 (2)
Rothmans' Balance Sheet 77 (2)
Rothmans' Income Statement 79 (2)
Rothmans' Cash Flow Statement 81 (2)
3.5 The Canadian Tax System 83 (15)
Corporate Taxes 84 (4)
Personal Tax 88 (3)
Summary 91 (7)
Chapter 4 Financial Statement Analysis and 98 (59)
Forecasting
4.1 Consistent Financial Analysis 100(2)
4.2 A Framework for Financial Analysis 102(7)
Return on Equity (ROE) and the DuPont 102(4)
System
Interpreting Ratios 106(3)
4.3 Leverage Ratios 109(3)
4.4 Efficiency Ratios 112(4)
4.5 Productivity Ratios 116(4)
4.6 Liquidity 120(4)
4.7 Valuation Ratios 124(5)
Concluding Comments on Valuation Ratios 129(1)
4.8 Financial Forecasting 129(9)
The Percentage of Sales Method 130(8)
4.9 Formula Forecasting 138(3)
4.10 Rothmans' External Financing 141(16)
Requirements
Summary 147(10)
PART 3 VALUATION BASICS 157(138)
Chapter 5 Time Value of Money 158(52)
5.1 Opportunity Cost 159(2)
5.2 Simple Interest 161(1)
5.3 Compound Interest 162(11)
Compounding (Computing Future Values) 162(6)
Discounting (Computing Present Values) 168(2)
Determining Rates of Return or Holding 170(3)
Periods
5.4 Annuities and Perpetuities 173(8)
The Importance of Investing Early 173(1)
Ordinary Annuities 173(4)
Annuities Due 177(2)
Perpetuities 179(1)
Closing Remarks on Annuities and 180(1)
Perpetuities
5.5 Nominal versus Effective Rates 181(4)
Determining Effective Annual Rates 181(3)
Effective Rates for "Any" Period 184(1)
5.6 Loan or Mortgage Arrangements 185(6)
Mortgages 188(3)
5.7 Comprehensive Examples 191(19)
Summary 197(13)
Chapter 6 Bond Valuation and Interest Rates 210(44)
6.1 The Basic Structure of Bonds 212(3)
Basic Bond Terminology 213(1)
Security and Protective Provisions 213(1)
Additional Bond Features 214(1)
6.2 Bond Valuation 215(11)
Factors Affecting Bond Prices 219(4)
Bond Quotes 223(2)
Cash Prices versus Quoted Prices 225(1)
6.3 Bond Yields 226(5)
Yield to Maturity 226(3)
Yield to Call 229(1)
Current Yield 230(1)
6.4 Interest Rate Determinants 231(9)
Base Interest Rates 231(2)
Global Influences on Interest Rates 233(1)
The Term Structure of Interest Rates 234(2)
Risk Premiums 236(4)
6.5 Other Types of Bonds/Debt Instruments 240(14)
Treasury Bills 240(1)
Zero Coupon Bonds 241(2)
Floating Rate and Real Return Bonds 243(1)
Canada Savings Bonds 243(1)
Summary 244(2)
Appendix 6-A Interest Rate Parity 246(8)
Chapter 7 Equity Valuation 254(41)
7.1 Equity Securities 255(2)
7.2 Valuation of Equity Securities 257(1)
7.3 Preferred Share Valuation 257(2)
7.4 Common Share Valuation by Using the 259(11)
Dividend Discount Model
The Basic Dividend Discount Model 259(2)
The Constant Growth DDM 261(1)
Estimating the Value of Growth 262(1)
Opportunities
Examining the Inputs into the Constant 263(2)
Growth DDM
Estimating the DDM Inputs 265(2)
The Multiple Stage Growth Version of 267(2)
the DDM
Limitations of the DDM 269(1)
7.5 Using Multiples to Value Shares: The 270(25)
Price-Earnings (P/E) Ratio
The Basic Approach 270(3)
Implementing the P/E Ratio Approach 273(2)
Limitations of P/E Ratios 275(2)
Additional Multiples or Relative Value 277(3)
Ratios
A Simple Application: Bennett 280(3)
Environmental
Summary 283(2)
Appendix 7-A A Primer on Bubbles 285(10)
PART 4 PORTFOLIOS AND CAPITAL MARKET THEORY 295(114)
Chapter 8 Risk, Return, and Portfolio Theory 296(50)
8.1 Measuring Returns 298(8)
Ex Post versus Ex Ante Returns 298(4)
Measuring Average Returns 302(3)
Estimating Expected Returns 305(1)
8.2 Measuring Risk 306(4)
8.3 Expected Return and Risk for 310(10)
Portfolios
Correlation Coefficient 314(2)
Correlation Coefficients and Portfolio 316(4)
Standard Deviation
8.4 The Efficient Frontier 320(4)
Two-Security Portfolio Combinations 320(1)
The Efficient Frontier 321(3)
8.5 Diversification 324(22)
Domestic Diversification 324(2)
International Diversification 326(3)
Summary 329(3)
Appendix 8-A Two-Security Portfolio 332(14)
Frontiers
Chapter 9 The Capital Asset Pricing Model 346(36)
(CAPM)
9.1 The New Efficient Frontier 348(8)
The Efficient Frontier with Risk-Free 348(2)
Borrowing and Lending
Risk-Free Investing 350(4)
Risk-Free Borrowing 354(1)
The New Efficient Set and the 354(2)
Separation Theorem
9.2 The Capital Asset Pricing Model (CAPM) 356(7)
The Market Portfolio and the Capital 356(4)
Market Line (CML)
Risk-Adjusted Performance and Sharpe 360(3)
Ratios
9.3 The CAPM and Market Risk 363(7)
The Security Market Line (SML) 367(1)
The SML and Security Valuation 368(2)
9.4 Alternative Asset Pricing Models 370(12)
The Fama-French Model 371(1)
The Arbitrage Pricing Theory (APT) 371(1)
Summary 372(10)
Chapter 10 Market Efficiency 382(27)
10.1 The Importance of Market Efficiency 384(1)
10.2 Defining Market Efficiency 385(4)
10.3 The Efficient Market Hypothesis (EMH) 389(1)
10.4 Empirical Evidence Regarding Market 390(9)
Efficiency
Weak Form Evidence 390(3)
Semi-Strong Form Evidence 393(5)
Strong Form Evidence 398(1)
Summary of Empirical Evidence 398(1)
10.5 Implications 399(10)
Summary 404(5)
PART 5 DERIVATIVE SECURITIES 409(90)
Chapter 11 Forwards, Futures, and Swaps 410(44)
11.1 Forward Contracts 412(10)
Basic Characteristics 412(1)
Using Forward Contracts 413(5)
Interest Rate Parity (IRP) Revisited 418(2)
Pricing Forward Contracts 420(2)
11.2 Futures Contracts 422(8)
The Mechanics of Futures Contracts 422(3)
Futures Contracts Markets 425(3)
Trading/Hedging With Futures Contracts 428(2)
Summary of Forward and Futures Contracts 430(1)
11.3 Swaps 430(24)
Interest Rate Swaps 431(3)
The Evolution of Swap Markets 434(4)
Recent Developments 438(1)
Summary 439(1)
Appendix 11-A Forward Interest Rates 440(14)
and Forward Rate Agreements (FRAS)
Chapter 12 Options 454(45)
12.1 Call Options 456(8)
Call Option Basics 456(3)
Call Option Values 459(5)
12.2 Put Options 464(4)
Put Option Payoffs 464(2)
Put Option Values 466(2)
12.3 Put-Call Parity 468(10)
The Four Basic Option Positions 468(1)
Deriving the Put-Call Parity 469(3)
Relationship
Creating Synthetic Positions by Using 472(6)
Put-Call Parity
12.4 Option Pricing 478(5)
The Black-Scholes Option Pricing Model 478(4)
The "Greeks" 482(1)
12.5 Options Markets 483(16)
Summary 486(1)
Appendix 12 A Binomial Option Pricing 487(12)
and Risk-Neutral Probabilities
PART 6 LONG-TERM INVESTMENT DECISIONS 499(162)
Chapter 13 Capital Budgeting, Risk 500(40)
Considerations, and Other Special Issues
13.1 Capital Expenditures 502(3)
The Importance of the Capital 502(3)
Expenditure Decision
13.2 Evaluating Investment Alternatives 505(14)
Net Present Value (NPV) Analysis 505(4)
The Internal Rate of Return (IRR) 509(3)
A Comparison of NPV and IRR 512(3)
Payback Period and Discounted Payback 515(2)
Period
Profitability Index (PI) 517(2)
13.3 Independent and Interdpependant 519(4)
Projects
13.4 Capital Rationing 523(3)
13.5 The Appropriate Discount Rate 526(1)
13.6 International Considerations 527(13)
Summary 529(11)
Chapter 14 Cash Flow Estimation and Capital 540(42)
Budgeting Decisions
14.1 General Guidelines 542(2)
14.2 Estimating and Discounting Cash Flows 544(12)
The Initial After-Tax Cash Flow (CF0) 544(1)
Expected Annual After-Tax Cash Flows 545(3)
(CFt)
Ending (or Terminal) After-Tax Cash 548(2)
Flows (ECFn)
Putting It All Together 550(1)
Valuation by Components 551(5)
14.3 Sensitivity to Inputs 556(7)
Sensitivity Analysis 557(4)
Real Option Valuation (ROV) 561(1)
NPV Break-Even Analysis 562(1)
14.4 Replacement Decisions 563(2)
14.5 Inflation and Capital Budgeting 565(17)
Decisions
Summary 569(13)
Chapter 15 Mergers and Acquisitions 582(48)
15.1 Types of Takeovers 584(3)
15.2 Securities Legislation 587(2)
15.3 Friendly versus Hostile Takeovers 589(6)
Friendly Takeovers 589(3)
Hostile Takeovers 592(3)
15.4 Motivations For Mergers and 595(10)
Acquisitions
Classifications of Mergers and 595(3)
Acquisitions
M&A Activity 598(2)
Value Creation Motivations for M&As 600(3)
Managerial Motivations for M&A 603(1)
What Gains Have Actually Resulted From 603(2)
Mergers? Empirical Evidence
15.5 Valuation Issues 605(14)
Multiples Valuation 608(4)
Liquidation Valuation 612(1)
Discounted Cash Flow Analysis 612(4)
The Acquisition Decision 616(1)
The Effect of an Acquisition on 617(2)
Earnings per Share
15.6 Accounting for Acquisitions 619(11)
Summary 621(9)
Chapter 16 Leasing 630(31)
16.1 Leasing Arrangements 632(3)
Types of Asset-Based Financing 633(2)
16.2 Accounting for Leases 635(6)
Financial Statement Effects of Lease 637(4)
Classification
16.3 Evaluating the Lease Decision 641(9)
16.4 Motivation for Leasing 650(11)
Case Example 651(2)
Summary 653(8)
PART 7 LONG-TERM FINANCING 661(150)
Chapter 17 Investment Banking and 662(34)
Securities Law
17.1 Conflicts between Issuers and 664(8)
Investors
The Basic Problem of Asymmetric 664(2)
Information
Real-World Examples of Fraudulent 666(5)
Activities
Some Canadian Examples of Fraudulent 671(1)
Activities
17.2 A Primer on Securities Legislation 672(6)
in Canada
Securities Legislation---Basic 672(2)
Responsibilities
Security Offerings 674(4)
17.3 IPOs and Investment Banking 678(8)
The Motivation for IPOs 678(2)
The Stages of the IPO Process 680(4)
IPO Underpricing 684(2)
17.4 Post-IPO Regulation and Seasoned 686(10)
Offerings
The Post-IPO Market 686(1)
Continuous Disclosure Requirements 687(1)
Seasoned Offerings and Short-Form 688(2)
Prospectuses
Summary 690(6)
Chapter 18 Debt Instruments 696(30)
18.1 What is Debt? 698(3)
18.2 Short-Term Debt and the Money Market 701(6)
Government Treasury Bills 701(1)
Commercial Paper 702(3)
Bankers' Acceptances (BAs) 705(2)
18.3 Bank Financing 707(2)
Lines of Credit (L/Cs) 707(1)
Term Loans 708(1)
18.4 Long-Term Financing 709(5)
18.5 Bond Ratings 714(12)
Interpreting Debt Ratings 714(1)
Determining Bond Ratings 715(2)
Empirical Evidence Regarding Debt 717(3)
Ratings
Summary 720(6)
Chapter 19 Equity and Hybrid Instruments 726(36)
19.1 Shareholders' Equity 728(7)
Shareholder Rights 728(2)
Different Classes of Shares 730(3)
Some Basic Ratios 733(2)
19.2 Preferred Share Characteristics 735(4)
19.3 Income Trusts 739(2)
19.4 Warrants and Convertible Securities 741(8)
Warrants 741(2)
Convertible Securities 743(6)
19.5 Other Hybrids 749(13)
Categorizing Hybrids 749(1)
Creative Hybrids: Some Examples 750(3)
A Financing Hierarchy 753(4)
Summary 757(5)
Chapter 20 Cost of Capital 762(49)
20.1 Financing Sources 764(6)
Capital Structure 764(2)
Three Ways of Using the Valuation 766(2)
Equation
Deriving the Required Income Statement 768(2)
20.2 The Cost of Capital 770(4)
Determining the Weighted Average Cost 770(2)
of Capital (WACC)
Estimating Market Values 772(2)
20.3 Estimating the Component Costs 774(3)
Flotation Costs and the Marginal Cost 774(2)
of Capital (MCC)
Debt 776(1)
Preferred Shares 776(1)
20.4 The Effects of Operating and 777(4)
Financial Leverage
Sales Changes and Leverage 777(2)
Revisiting Rothmans Inc 779(2)
20.5 Growth Models and the Cost of Common 781(12)
Equity
The Importance of Adjusting for Growth 781(2)
The Constant Growth Model 783(2)
Growth and ROE 785(3)
Multi-Stage Growth Models 788(3)
The Fed Model 791(2)
20.6 Risk-Based Models and the Cost of 793(8)
Common Equity
Using the CAPM to Estimate the Cost of 793(3)
Common Equity
Estimating Betas 796(5)
20.7 The Cost of Capital and Investment 801(10)
Summary 802(9)
PART 8 FINANCIAL POLICIES 811(88)
Chapter 21 Capital Structure Theory 812(48)
21.1 Financial Leverage 814(9)
Risk and Leverage 814(3)
The Rules of Financial Leverage 817(3)
Indifference Analysis 820(3)
21.2 Determining Capital Structure 823(4)
21.3 The Modigliani and Miller (M&M) 827(7)
Irrelevance Theorem
M&M and Firm Value 827(3)
M&M and the Cost of Capital 830(4)
21.4 The Impact of Taxes 834(5)
Introducing Corporate Taxes 834(5)
21.5 Financial Distress, Bankruptcy, and 839(6)
Agency Costs
21.6 Other Factors Affecting Capital 845(1)
Structure
21.7 Capital Structure in Practice 846(14)
Summary 850(3)
Appendix 21-A Personal Taxes and 853(7)
Capital Structure
Chapter 22 Dividend Policy 860(39)
22.1 Dividend Payments 862(4)
The Mechanics of Cash Dividend Payments 862(2)
Dividend Reinvestment Plans (DRIPs), 864(2)
Stock Dividends, and Stock Splits
22.2 Cash Dividend Payments 866(4)
22.3 Modigliani and Miller's Dividend 870(6)
Irrelevance Theorem
M&M, Dividends, and Firm Value 870(4)
M&M's Homemade Dividend Argument 874(2)
22.4 The "Bird in the Hand" Argument 876(5)
22.5 Dividend Policy in Practice 881(3)
22.6 Relaxing the M&M Assumptions: 884(6)
Welcome To The Real World!
Transactions Costs 885(1)
Dividends and Signalling 885(2)
Taxes 887(1)
Repackaging Dividend-Paying Securities 888(2)
22.7 Share Repurchases 890(9)
Summary 892(7)
PART 9 WORKING CAPITAL MANAGEMENT 899
Chapter 23 Working Capital Management: 900(28)
General Issues
23.1 An Integrated Approach to Net 902(7)
Working Capital (NWC) Management
A Classic Working Capital Problem 902(3)
The Cash Budget 905(4)
23.2 Analyzing Cash Inflows and Outflows 909(5)
Cash Changes and Sales Growth 909(2)
Credit, Inventory, and Payables 911(3)
23.3 Working Capital Management 914(14)
Working Capital Ratios 914(2)
Operating and Cash Conversion Cycles 916(1)
An Illustrative Example 917(4)
Summary 921(7)
Chapter 24 Working Capital Management: 928
Current Assets and Current Liabilities
24.1 Cash and Marketable Securities 930(4)
Reasons for Holding Cash 930(1)
Determining the Optimal Cash Balance 931(1)
Cash Management Techniques 932(2)
24.2 Accounts Receivable 934(7)
The Credit Decision 934(2)
Credit Polices 936(3)
The Collection Process 939(2)
24.3 Inventory 941(2)
Inventory Management Approaches 941(1)
Evaluating Inventory Management 942(1)
24.4 Short-Term Financing Considerations 943
Trade Credit 943(1)
Bank Loans 944(2)
Factor Arrangements 946(1)
Money Market Instruments 947(2)
Securitizations 949(2)
Summary 951
Appendix I Rothmans Inc. 2006 Consolidated 1 (17)
Financial Statements and Accompanying Notes
Appendix II Cumulative Normal Distribution Table 18
Index 1