| Preface | p. xiii |
| Assessing the Financial Health of the Firm | p. 1 |
| Interpreting Financial Statements | p. 3 |
| The Cash Flow Cycle | p. 3 |
| The Balance Sheet | p. 6 |
| Current Assets and Liabilities | p. 10 |
| Shareholders' Equity | p. 11 |
| The Income Statement | p. 11 |
| Measuring Earnings | p. 12 |
| Sources and Uses Statements | p. 16 |
| The Two-Finger Approach | p. 18 |
| The Cash Flow Statement | p. 18 |
| Financial Statements and the Value Problem | p. 23 |
| Market Value versus Book Value | p. 23 |
| Economic Income versus Accounting Income | p. 26 |
| Imputed Costs | p. 27 |
| Summary | p. 29 |
| Additional Resources | p. 30 |
| Problems | p. 31 |
| Evaluating Financial Performance | p. 35 |
| The Levers of Financial Performance | p. 35 |
| Return on Equity | p. 36 |
| The Three Determinants of ROE | p. 36 |
| The Profit Margin | p. 38 |
| Asset Turnover | p. 40 |
| Financial Leverage | p. 46 |
| Is ROE a Reliable Financial Yardstick? | p. 52 |
| The Timing Problem | p. 52 |
| The Risk Problem | p. 52 |
| The Value Problem | p. 54 |
| ROE or Market Price? | p. 56 |
| Ratio Analysis | p. 56 |
| Using Ratios Effectively | p. 59 |
| Ratio Analysis of Harley-Davidson, Inc. | p. 60 |
| International Differences in Financial Structure | p. 70 |
| Comparisons among Foreign Companies Trading on U.S. Markets | p. 70 |
| Public Companies | p. 72 |
| The Move Toward International Accounting Standards | p. 74 |
| Summary | p. 76 |
| Additional Resources | p. 77 |
| Problems | p. 79 |
| Planning Future Financial Performance | p. 85 |
| Financial Forecasting | p. 87 |
| Pro Forma Statements | p. 87 |
| Percent-of-Sales Forecasting | p. 88 |
| Interest Expense | p. 94 |
| Seasonality | p. 95 |
| Pro Forma Statements and Financial Planning | p. 95 |
| Computer-Based Forecasting | p. 96 |
| Coping with Uncertainty | p. 100 |
| Sensitivity Analysis | p. 100 |
| Scenario Analysis | p. 101 |
| Simulation | p. 102 |
| Cash Flow Forecasts | p. 104 |
| Cash Budgets | p. 105 |
| The Techniques Compared | p. 108 |
| Planning in Large Companies | p. 108 |
| Summary | p. 110 |
| Additional Resources | p. 111 |
| Problems | p. 112 |
| Managing Growth | p. 119 |
| Sustainable Growth | p. 120 |
| The Sustainable Growth Equation | p. 120 |
| Too Much Growth | p. 123 |
| Balanced Growth | p. 123 |
| Biosite, Inc. 's Sustainable Growth Rate | p. 124 |
| "What If" Questions | p. 126 |
| What to Do When Actual Growth Exceeds Sustainable Growth | p. 126 |
| Sell New Equity | p. 127 |
| Increase Leverage | p. 128 |
| Reduce the Payout Ratio | p. 129 |
| Profitable Pruning | p. 129 |
| Outsourcing | p. 130 |
| Pricing | p. 131 |
| Is Merger the Answer? | p. 131 |
| Too Little Growth | p. 131 |
| What to Do When Sustainable Growth Exceeds Actual Growth | p. 133 |
| Ignore the Problem | p. 133 |
| Return the Money to Shareholders | p. 134 |
| Buy Growth | p. 135 |
| Sustainable Growth and Inflation | p. 135 |
| Sustainable Growth and Pro Forma Forecasts | p. 136 |
| New Equity Financing | p. 137 |
| Why Don't U.S. Corporations Issue More Equity? | p. 140 |
| Summary | p. 141 |
| Additional Resources | p. 142 |
| Problems | p. 142 |
| Financing Operations | p. 147 |
| Financial Instruments and Markets | p. 149 |
| Financial Instruments | p. 150 |
| Bonds | p. 151 |
| Common Stock | p. 157 |
| Preferred Stock | p. 160 |
| Financial Markets | p. 163 |
| Private Equity Financing | p. 163 |
| Initial Public Offerings | p. 166 |
| Seasoned Issues | p. 161 |
| Issue Costs | p. 110 |
| Efficient Markets | p. 172 |
| What Is an Efficient Market? | p. 173 |
| Implications of Efficiency | p. 116 |
| Forward Contracts, Options, and the Management of Corporate Risks | p. 177 |
| Forward Markets | p. 178 |
| Hedging in Money and Capital Markets | p. 182 |
| Hedging with Options | p. 182 |
| Limitations of Financial Market Hedging | p. 185 |
| Valuing Options | p. 181 |
| Summary | p. 190 |
| Additional Resources | p. 191 |
| Problems | p. 192 |
| The Financing Decision | p. 197 |
| Financial Leverage | p. 199 |
| Measuring the Effects of Leverage on a Business | p. 203 |
| Leverage and Risk | p. 204 |
| Leverage and Earnings | p. 201 |
| How Much to Borrow | p. 210 |
| Irrelevance | p. 210 |
| Tax Benefits | p. 212 |
| Distress Costs | p. 212 |
| Flexibility | p. 217 |
| Market Signaling | p. 219 |
| Management Incentives | p. 222 |
| The Financing Decision and Growth | p. 222 |
| Selecting a Maturity Structure | p. 226 |
| Inflation and Financing Strategy | p. 226 |
| The Irrelevance Proposition | p. 227 |
| No Taxes | p. 221 |
| Taxes | p. 229 |
| Summary | p. 231 |
| Additional Resources | p. 232 |
| Problems | p. 232 |
| Evaluating Investment Opportunities | p. 237 |
| Discounted Cash Flow Techniques | p. 239 |
| Figures of Merit | p. 240 |
| The Payback Period and the Accounting Rate of Return | p. 241 |
| The Time Value of Money | p. 242 |
| Equivalence | p. 246 |
| The Net Present Value | p. 241 |
| The Benefit-Cost Ratio | p. 249 |
| The Internal Rate of Return | p. 249 |
| A Few Applications and Extensions | p. 253 |
| Mutually Exclusive Alternatives and Capital Rationing | p. 256 |
| The IRR in Perspective | p. 257 |
| Determining the Relevant Cash Flows | p. 258 |
| Depreciation | p. 260 |
| Working Capital and Spontaneous Sources | p. 262 |
| Sunk Costs | p. 263 |
| Allocated Costs | p. 264 |
| Excess Capacity | p. 265 |
| Financing Costs | p. 261 |
| Mutually Exclusive Alternatives and Capital Rationing | p. 269 |
| What Happened to the Other $578,000? | p. 270 |
| Unequal Lives | p. 271 |
| Capital Rationing | p. 273 |
| The Problem of Future Opportunities | p. 215 |
| A Decision Tree | p. 215 |
| Summary | p. 276 |
| Additional Resources | p. 277 |
| Problems | p. 278 |
| Risk Analysis in Investment Decisions | p. 283 |
| Risk Defined | p. 285 |
| Risk and Diversification | p. 287 |
| Estimating Investment Risk | p. 289 |
| Three Techniques for Estimating Investment Risk | p. 290 |
| Including Risk in Investment Evaluation | p. 291 |
| Risk-Adjusted Discount Rates | p. 291 |
| The Cost of Capital | p. 293 |
| The Cost of Capital Defined | p. 294 |
| Cost of Capital for Harley-Davidson, Inc. | p. 296 |
| The Cost of Capital in Investment Appraisal | p. 305 |
| Multiple Hurdle Rates | p. 306 |
| Four Pitfalls in the Use of Discounted Cash Flow Techniques | p. 308 |
| The Enterprise Perspective versus the Equity Perspective | p. 309 |
| Inflation | p. 311 |
| Real Options | p. 312 |
| Excessive Risk Adjustment | p. 315 |
| Economic Value Added | p. 317 |
| EVA and Investment Analysis | p. 318 |
| EVA's Appeal | p. 319 |
| A Cautionary Note | p. 320 |
| Asset Beta and Adjusted Present Value | p. 321 |
| Beta and Financial Leverage | p. 321 |
| Using Asset Beta to Estimate Equity Beta | p. 322 |
| Asset Beta and Adjusted Present Value | p. 323 |
| Summary | p. 326 |
| Additional Resources | p. 328 |
| Problems | p. 329 |
| Business Valuation and Corporate Restructuring | p. 335 |
| Valuing a Business | p. 337 |
| Assets or Equity? | p. 337 |
| Dead or Alive? | p. 338 |
| Minority Interest or Control? | p. 340 |
| Discounted Cash Flow Valuation | p. 340 |
| Free Cash Flow | p. 342 |
| The Terminal Value | p. 342 |
| A Numerical Example | p. 346 |
| Problems with Present Value Approaches to Valuation | p. 348 |
| Valuation Based on Comparable Trades | p. 349 |
| Lack of Marketability | p. 353 |
| The Market for Control | p. 354 |
| The Premium for Control | p. 354 |
| Financial Reasons for Restructuring | p. 356 |
| The Empirical Evidence | p. 363 |
| The Daimler-Chrysler Merger | p. 365 |
| The Venture Capital Method of Valuation | p. 368 |
| The Venture Capital Method-One Financing Round | p. 369 |
| The Venture Capital Method-Multiple Financing Rounds | p. 372 |
| Why Do Venture Capitalists Demand Such High Returns? | p. 374 |
| Summary | p. 375 |
| Additional Resources | p. 376 |
| Problems | p. 377 |
| Present Value of $1 | p. 383 |
| Present Value of an Annuity of $1 | p. 385 |
| Glossary | p. 387 |
| Suggested Answers to Odd-Numbered Problems | p. 399 |
| Index | p. 421 |
| Table of Contents provided by Ingram. All Rights Reserved. |