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Principles of Managerial Finance Brief Gitman 7th Edition Test Bank

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Guide students through complex material with a proven learning goal system. This system – a hallmark feature of Principles of Managerial Finance, Brief—weaves pedagogy into concepts and practice, giving students a roadmap to follow through the text and supplementary tools.

 

Table of Content:

  1. CHANGES TO THE SEVENTH EDITION
  2. ORGANIZATION
  3. INTERNATIONAL CONSIDERATIONS
  4. PERSONAL FINANCE LINKAGES
  5. ETHICAL ISSUES
  6. HOMEWORK OPPORTUNITIES
  7. Supplements to the Seventh Edition
  8. TEACHING TOOLS FOR INSTRUCTORS
  9. Instructor’s Manual
  10. Test Item File
  11. PowerPoint Lecture Presentation
  12. LEARNING TOOLS FOR STUDENTS
  13. MyFinanceLab
  14. Study Guide
  15. NEW! Interest Rate Factor (IRF) Supplement
  16. Acknowledgments
  17. TO OUR COLLEAGUES, FRIENDS, AND FAMILY
  18. Part 1 Introduction to Managerial Finance
  19. Chapters in This Part
  20. 1 The Role of Managerial Finance
  21. Learning Goals
  22. Why This Chapter Matters to You
  23. 1.1 Finance and Business
  24. WHAT IS FINANCE?
  25. CAREER OPPORTUNITIES IN FINANCE
  26. Financial Services
  27. Managerial Finance
  28. LEGAL FORMS OF BUSINESS ORGANIZATION
  29. Sole Proprietorships
  30. Partnerships
  31. Matter of fact
  32. BizStats.com Total Receipts by Type of U.S. Firm
  33. TABLE 1.1 Strengths and Weaknesses of the Common Legal Forms of Business Organization
  34. Corporations
  35. FIGURE 1.1 Corporate Organization
  36. Other Limited Liability Organizations
  37. WHY STUDY MANAGERIAL FINANCE?
  38. TABLE 1.2 Career Opportunities in Managerial Finance
  39. REVIEW QUESTIONS
  40. 1.2 Goal of the Firm
  41. MAXIMIZE SHAREHOLDER WEALTH
  42. MAXIMIZE PROFIT?
  43. FIGURE 1.2 Share Price Maximization
  44. Example 1.1
  45. Timing
  46. Cash Flows
  47. Risk
  48. WHAT ABOUT STAKEHOLDERS?
  49. THE ROLE OF BUSINESS ETHICS
  50. Matter of fact
  51. Considering Ethics
  52. ETHICS AND SHARE PRICE
  53. in practice focus on ETHICS: Critics See Ethical Dilemmas in Google Glass?
  54. REVIEW QUESTIONS
  55. 1.3 Managerial Finance Function
  56. ORGANIZATION OF THE FINANCE FUNCTION
  57. RELATIONSHIP TO ECONOMICS
  58. Example 1.2
  59. RELATIONSHIP TO ACCOUNTING
  60. Emphasis on Cash Flows
  61. Example 1.3
  62. Personal Finance Example 1.4
  63. Decision Making
  64. PRIMARY ACTIVITIES OF THE FINANCIAL MANAGER
  65. FIGURE 1.3 Financial Activities
  66. REVIEW QUESTIONS
  67. 1.4 Governance and Agency
  68. CORPORATE GOVERNANCE
  69. Individual versus Institutional Investors
  70. Government Regulation
  71. THE AGENCY ISSUE
  72. The Agency Problem
  73. Management Compensation Plans
  74. Matter of fact
  75. The Threat of Takeover
  76. REVIEW QUESTIONS
  77. Summary
  78. FOCUS ON VALUE
  79. REVIEW OF LEARNING GOALS
  80. Self-Test Problem
  81. Warm-up Exercises
  82. Problems
  83. Spreadsheet Exercise
  84. TO DO
  85. MyFinanceLab
  86. 2 The Financial Market Environment
  87. Learning Goals
  88. Why This Chapter Matters to You
  89. 2.1 Financial Institutions and Markets
  90. FINANCIAL INSTITUTIONS
  91. Key Customers of Financial Institutions
  92. Major Financial Institutions
  93. COMMERCIAL BANKS, INVESTMENT BANKS, AND THE SHADOW BANKING SYSTEM
  94. Matter of fact
  95. FINANCIAL MARKETS
  96. THE RELATIONSHIP BETWEEN INSTITUTIONS AND MARKETS
  97. FIGURE 2.1 Flow of Funds
  98. THE MONEY MARKET
  99. THE CAPITAL MARKET
  100. Key Securities Traded: Bonds and Stocks
  101. Example 2.1
  102. Broker Markets and Dealer Markets
  103. in practice focus on PRACTICE: Berkshire Hathaway: Can Buffett Be Replaced?
  104. International Capital Markets
  105. Matter of fact
  106. The Role of Capital Markets
  107. REVIEW QUESTIONS
  108. 2.2 The Financial Crisis
  109. FINANCIAL INSTITUTIONS AND REAL ESTATE FINANCE
  110. FALLING HOME PRICES AND DELINQUENT MORTGAGES
  111. FIGURE 2.2 House Prices Soar and then Crash
  112. CRISIS OF CONFIDENCE IN BANKS
  113. FIGURE 2.3 Bank Stocks Plummet During Financial Crisis
  114. SPILLOVER EFFECTS AND THE GREAT RECESSION
  115. REVIEW QUESTIONS
  116. 2.3 Regulation of Financial Institutions and Markets
  117. REGULATIONS GOVERNING FINANCIAL INSTITUTIONS
  118. REGULATIONS GOVERNING FINANCIAL MARKETS
  119. REVIEW QUESTIONS
  120. 2.4 Business Taxes
  121. ORDINARY INCOME
  122. Example 2.2
  123. Marginal versus Average Tax Rates
  124. TABLE 2.1 Corporate Tax Rate Schedule
  125. Interest and Dividend Income
  126. Tax-Deductible Expenses
  127. Example 2.3
  128. CAPITAL GAINS
  129. Example 2.4
  130. REVIEW QUESTIONS
  131. Summary
  132. THE ROLE OF FINANCIAL INSTITUTIONS AND MARKETS
  133. REVIEW OF LEARNING GOALS
  134. Self-Test Problem
  135. Warm-Up Exercises
  136. Problems
  137. Spreadsheet Exercise
  138. TO DO
  139. MyFinanceLab
  140. Part 2 Financial Tools
  141. Chapters in This Part
  142. 3 Financial Statements and Ratio Analysis
  143. Learning Goals
  144. Why This Chapter Matters to You
  145. 3.1 The Stockholders’ Report
  146. THE LETTER TO STOCKHOLDERS
  147. THE FOUR KEY FINANCIAL STATEMENTS
  148. Income Statement
  149. in practice focus on ETHICS: Taking Earnings Reports at Face Value
  150. TABLE 3.1 Bartlett Company Income Statements ($000)
  151. Personal Finance Example 3.1
  152. Balance Sheet
  153. TABLE 3.2 Bartlett Company Balance Sheets ($000)
  154. Personal Finance Example 3.2
  155. Statement of Retained Earnings
  156. TABLE 3.3 Bartlett Company Statement of Retained Earnings ($000) for the Year Ended December 31, 2015
  157. Statement of Cash Flows
  158. TABLE 3.4 Bartlett Company Statement of Cash Flows ($000) for the Year Ended December 31, 2015
  159. NOTES TO THE FINANCIAL STATEMENTS
  160. CONSOLIDATING INTERNATIONAL FINANCIAL STATEMENTS
  161. REVIEW QUESTIONS
  162. 3.2 Using Financial Ratios
  163. INTERESTED PARTIES
  164. TYPES OF RATIO COMPARISONS
  165. Cross-Sectional Analysis
  166. TABLE 3.5 Financial Ratios for Select Firms and Their Industry Median Values
  167. Example 3.3
  168. Time-Series Analysis
  169. Combined Analysis
  170. CAUTIONS ABOUT USING RATIO ANALYSIS
  171. FIGURE 3.1 Combined Analysis
  172. CATEGORIES OF FINANCIAL RATIOS
  173. REVIEW QUESTIONS
  174. 3.3 Liquidity Ratios
  175. CURRENT RATIO
  176. Matter of fact
  177. Personal Finance Example 3.4
  178. QUICK (ACID-TEST) RATIO
  179. Matter of fact
  180. REVIEW QUESTIONS
  181. 3.4 Activity Ratios
  182. INVENTORY TURNOVER
  183. AVERAGE COLLECTION PERIOD
  184. Matter of fact
  185. AVERAGE PAYMENT PERIOD
  186. TOTAL ASSET TURNOVER
  187. Matter of fact
  188. REVIEW QUESTION
  189. 3.5 Debt Ratios
  190. Example 3.5
  191. TABLE 3.6 Financial Statements Associated with Patty’s Alternatives
  192. DEBT RATIO
  193. DEBT-TO-EQUITY RATIO
  194. TIMES INTEREST EARNED RATIO
  195. FIXED-PAYMENT COVERAGE RATIO
  196. REVIEW QUESTIONS
  197. 3.6 Profitability Ratios
  198. COMMON-SIZE INCOME STATEMENTS
  199. GROSS PROFIT MARGIN
  200. OPERATING PROFIT MARGIN
  201. TABLE 3.7 Bartlett Company Common-Size Income Statements
  202. NET PROFIT MARGIN
  203. EARNINGS PER SHARE (EPS)
  204. RETURN ON TOTAL ASSETS (ROA)
  205. RETURN ON EQUITY (ROE)
  206. REVIEW QUESTIONS
  207. 3.7 Market Ratios
  208. PRICE/EARNINGS (P/E) RATIO
  209. MARKET/BOOK (M/B) RATIO
  210. REVIEW QUESTION
  211. 3.8 A Complete Ratio Analysis
  212. SUMMARIZING ALL RATIOS
  213. Liquidity
  214. Activity
  215. Debt
  216. Profitability
  217. Market
  218. DUPONT SYSTEM OF ANALYSIS
  219. DuPont Formula
  220. TABLE 3.8 Summary of Bartlett Company Ratios (2010–2015, Including 2015 Industry Averages)
  221. FIGURE 3.2 DuPont System of Analysis
  222. Modified DuPont Formula
  223. Matter of fact
  224. Applying the DuPont System
  225. Example 3.6
  226. REVIEW QUESTIONS
  227. Summary
  228. FOCUS ON VALUE
  229. REVIEW OF LEARNING GOALS
  230. Self-Test Problems
  231. Warm-Up Exercises
  232. Problems
  233. Spreadsheet Exercise
  234. TO DO
  235. MyFinanceLab
  236. 4 Cash Flow and Financial Planning
  237. Learning Goals
  238. Why This Chapter Matters to You
  239. 4.1 Analyzing the Firm’s Cash Flow
  240. DEPRECIATION
  241. Depreciable Value of an Asset
  242. Example 4.1
  243. Depreciable Life of an Asset
  244. TABLE 4.1 First Four Property Classes under MACRS
  245. DEPRECIATION METHODS
  246. TABLE 4.2 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes
  247. Example 4.2
  248. DEVELOPING THE STATEMENT OF CASH FLOWS
  249. Classifying Inflows and Outflows of Cash
  250. Matter of fact
  251. TABLE 4.3 Inflows and Outflows of Cash
  252. Preparing the Statement of Cash Flows
  253. TABLE 4.4 Baker Corporation 2015 Income Statement ($000)
  254. TABLE 4.5 Baker Corporation Balance Sheets ($000)
  255. Interpreting the Statement
  256. TABLE 4.6 Baker Corporation Statement of Cash Flows ($000) for the Year Ended December 31, 2015
  257. Example 4.3
  258. FREE CASH FLOW
  259. Example 4.4
  260. Example 4.5
  261. REVIEW QUESTIONS
  262. in practice focus on PRACTICE: Free Cash Flow at Cisco Systems
  263. 4.2 The Financial Planning Process
  264. LONG-TERM (STRATEGIC) FINANCIAL PLANS
  265. SHORT-TERM (OPERATING) FINANCIAL PLANS
  266. FIGURE 4.1 Short-Term Financial Planning
  267. Personal Finance Example 4.6
  268. REVIEW QUESTIONS
  269. 4.3 Cash Planning: Cash Budgets
  270. THE SALES FORECAST
  271. PREPARING THE CASH BUDGET
  272. TABLE 4.7 The General Format of the Cash Budget
  273. Total Cash Receipts
  274. Example 4.7
  275. TABLE 4.8 A Schedule of Projected Cash Receipts for Coulson Industries ($000)
  276. Total cash disbursements
  277. Example 4.8
  278. TABLE 4.9 A Schedule of Projected Cash Disbursements for Coulson Industries ($000)
  279. Net Cash Flow, Ending Cash, Financing, and Excess Cash
  280. Example 4.9
  281. TABLE 4.10 A Cash Budget for Coulson Industries ($000)
  282. EVALUATING THE CASH BUDGET
  283. Personal Finance Example 4.10
  284. COPING WITH UNCERTAINTY IN THE CASH BUDGET
  285. Example 4.11
  286. TABLE 4.11 A Scenario Analysis of Coulson Industries’ Cash Budget ($000)
  287. CASH FLOW WITHIN THE MONTH
  288. REVIEW QUESTIONS
  289. 4.4 Profit Planning: Pro Forma Statements
  290. PRECEDING YEAR’S FINANCIAL STATEMENTS
  291. SALES FORECAST
  292. REVIEW QUESTIONS
  293. TABLE 4.12 Vectra Manufacturing’s Income Statement for the Year Ended December 31, 2015
  294. TABLE 4.13 Vectra Manufacturing’s Balance Sheet, December 31, 2015
  295. TABLE 4.14 2016 Sales Forecast for Vectra Manufacturing
  296. 4.5 Preparing the Pro Forma Income Statement
  297. CONSIDERING TYPES OF COSTS AND EXPENSES
  298. TABLE 4.15 A Pro Forma Income Statement, Using the Percent-of-Sales Method, for Vectra Manufacturing for the Year Ended December 31, 2016
  299. Example 4.12
  300. REVIEW QUESTIONS
  301. 4.6 Preparing the Pro Forma Balance Sheet
  302. TABLE 4.16 A Pro Forma Balance Sheet, Using the Judgmental Approach, for Vectra Manufacturing (December 31, 2016)
  303. REVIEW QUESTIONS
  304. 4.7 Evaluation of Pro Forma Statements
  305. REVIEW QUESTIONS
  306. Summary
  307. FOCUS ON VALUE
  308. REVIEW OF LEARNING GOALS
  309. Self-Test Problems
  310. Warm-Up Exercises
  311. Problems
  312. Spreadsheet Exercise
  313. TO DO
  314. MyFinanceLab
  315. 5 Time Value of Money
  316. Learning Goals
  317. Why This Chapter Matters to You
  318. 5.1 The Role of Time Value in Finance
  319. FUTURE VALUE VERSUS PRESENT VALUE
  320. FIGURE 5.1 Time Line
  321. FIGURE 5.2 Compounding and Discounting
  322. COMPUTATIONAL TOOLS
  323. Financial Calculators
  324. FIGURE 5.3 Calculator Keys
  325. Electronic Spreadsheets
  326. Cash Flow Signs
  327. BASIC PATTERNS OF CASH FLOW
  328. REVIEW QUESTIONS
  329. 5.2 Single Amounts
  330. FUTURE VALUE OF A SINGLE AMOUNT
  331. The Concept of Future Value
  332. Personal Finance Example 5.1
  333. The Equation for Future Value
  334. Personal Finance Example 5.2
  335. Personal Finance Example 5.3
  336. A Graphical View of Future Value
  337. FIGURE 5.4 Future Value Relationship
  338. PRESENT VALUE OF A SINGLE AMOUNT
  339. The Concept of Present Value
  340. Personal Finance Example 5.4
  341. The Equation for Present Value
  342. Personal Finance Example 5.5
  343. A Graphical View of Present Value
  344. REVIEW QUESTIONS
  345. FIGURE 5.5 Present Value Relationship
  346. EXCEL REVIEW QUESTIONS
  347. 5.3 Annuities
  348. TYPES OF ANNUITIES
  349. Personal Finance Example 5.6
  350. TABLE 5.1 Comparison of Ordinary Annuity and Annuity Due Cash Flows ($1,000, 5 Years)
  351. FINDING THE FUTURE VALUE OF AN ORDINARY ANNUITY
  352. Personal Finance Example 5.7
  353. FINDING THE PRESENT VALUE OF AN ORDINARY ANNUITY
  354. Example 5.8
  355. TABLE 5.2 Long Method for Finding the Present Value of an Ordinary Annuity
  356. FINDING THE FUTURE VALUE OF AN ANNUITY DUE
  357. Personal Finance Example 5.9
  358. Comparison of an Annuity Due with an Ordinary Annuity Future Value
  359. FINDING THE PRESENT VALUE OF AN ANNUITY DUE
  360. Example 5.10
  361. Comparison of an Annuity Due with an Ordinary Annuity Present Value
  362. Matter of fact
  363. FINDING THE PRESENT VALUE OF A PERPETUITY
  364. Personal Finance Example 5.11
  365. REVIEW QUESTIONS
  366. EXCEL REVIEW QUESTIONS
  367. 5.4 Mixed Streams
  368. FUTURE VALUE OF A MIXED STREAM
  369. Example 5.12
  370. PRESENT VALUE OF A MIXED STREAM
  371. Example 5.13
  372. REVIEW QUESTION
  373. EXCEL REVIEW QUESTIONS
  374. 5.5 Compounding Interest More Frequently Than Annually
  375. SEMIANNUAL COMPOUNDING
  376. Personal Finance Example 5.14
  377. TABLE 5.3 Future Value from Investing $100 at 8% Interest Compounded Semiannually over 24 Months (2 Years)
  378. QUARTERLY COMPOUNDING
  379. Personal Finance Example 5.15
  380. TABLE 5.4 Future Value from Investing $100 at 8% Interest Compounded Quarterly over 24 Months (2 Years)
  381. TABLE 5.5 Future Value at the End of Years 1 and 2 from Investing $100 at 8% Interest, Given Various Compounding Periods
  382. A GENERAL EQUATION FOR COMPOUNDING MORE FREQUENTLY THAN ANNUALLY
  383. Personal Finance Example 5.16
  384. USING COMPUTATIONAL TOOLS FOR COMPOUNDING MORE FREQUENTLY THAN ANNUALLY
  385. Personal Finance Example 5.17
  386. CONTINUOUS COMPOUNDING
  387. Personal Finance Example 5.18
  388. NOMINAL AND EFFECTIVE ANNUAL RATES OF INTEREST
  389. Personal Finance Example 5.19
  390. REVIEW QUESTIONS
  391. EXCEL REVIEW QUESTIONS
  392. 5.6 Special Applications of Time Value
  393. DETERMINING DEPOSITS NEEDED TO ACCUMULATE A FUTURE SUM
  394. Personal Finance Example 5.20
  395. LOAN AMORTIZATION
  396. Personal Finance Example 5.21
  397. TABLE 5.6 Loan Amortization Schedule ($6,000 Principal, 10% Interest, 4-Year Repayment Period)
  398. in practice focus on PRACTICE: New Century Brings Trouble for Subprime Mortgages
  399. FINDING INTEREST OR GROWTH RATES
  400. Personal Finance Example 5.22
  401. Personal Finance Example 5.23
  402. FINDING AN UNKNOWN NUMBER OF PERIODS
  403. Personal Finance Example 5.24
  404. Personal Finance Example 5.25
  405. REVIEW QUESTIONS
  406. EXCEL REVIEW QUESTIONS
  407. Summary
  408. FOCUS ON VALUE
  409. REVIEW OF LEARNING GOALS
  410. Self-Test Problems
  411. Warm-Up Exercises
  412. Problems
  413. Spreadsheet Exercise
  414. TO DO
  415. MyFinanceLab
  416. Part 3 Valuation of Securities
  417. Chapters in This Part
  418. 6 Interest Rates and Bond Valuation
  419. Learning Goals
  420. Why This Chapter Matters to You
  421. 6.1 Interest Rates and Required Returns
  422. INTEREST RATE FUNDAMENTALS
  423. Matter of fact
  424. The Real Rate of Interest
  425. FIGURE 6.1 Supply–Demand Relationship
  426. Nominal or Actual Rate of Interest (Return)
  427. Personal Finance Example 6.1
  428. FIGURE 6.2 Impact of Inflation
  429. TERM STRUCTURE OF INTEREST RATES
  430. Yield Curves
  431. FIGURE 6.3 Treasury Yield Curves
  432. Matter of fact
  433. Theories of Term Structure
  434. Expectations Theory
  435. Example 6.2
  436. Liquidity Preference Theory
  437. Market Segmentation Theory
  438. RISK PREMIUMS: ISSUER AND ISSUE CHARACTERISTICS
  439. Example 6.3
  440. TABLE 6.1 Debt-Specific Risk Premium Components
  441. REVIEW QUESTIONS
  442. 6.2 Corporate Bonds
  443. LEGAL ASPECTS OF CORPORATE BONDS
  444. Bond Indenture
  445. Standard Provisions
  446. Restrictive Provisions
  447. Sinking-Fund Requirements
  448. Security Interest
  449. Trustee
  450. COST OF BONDS TO THE ISSUER
  451. Impact of Bond Maturity
  452. Impact of Offering Size
  453. Impact of Issuer’s Risk
  454. Impact of the Cost of Money
  455. GENERAL FEATURES OF A BOND ISSUE
  456. BOND YIELDS
  457. BOND PRICES
  458. TABLE 6.2 Data on Selected Bonds
  459. BOND RATINGS
  460. in practice focus on ETHICS: Can We Trust the Bond Raters?
  461. TABLE 6.3 Moody’s and Standard & Poor’s Bond Ratings
  462. COMMON TYPES OF BONDS
  463. INTERNATIONAL BOND ISSUES
  464. TABLE 6.4 Characteristics and Priority of Lender’s Claim of Traditional Types of Bonds
  465. REVIEW QUESTIONS
  466. TABLE 6.5 Characteristics of Contemporary Types of Bonds
  467. 6.3 Valuation Fundamentals
  468. KEY INPUTS
  469. Cash Flows (Returns)
  470. Personal Finance Example 6.4
  471. Timing
  472. Risk and Required Return
  473. Personal Finance Example 6.5
  474. BASIC VALUATION MODEL
  475. Personal Finance Example 6.6
  476. REVIEW QUESTIONS
  477. 6.4 Bond Valuation
  478. BOND FUNDAMENTALS
  479. Example 6.7
  480. BASIC BOND VALUATION
  481. Personal Finance Example 6.8
  482. BOND VALUE BEHAVIOR
  483. Required Returns and Bond Values
  484. Example 6.9
  485. FIGURE 6.4 Bond Values and Required Returns
  486. TABLE 6.6 Bond Values for Various Required Returns (Mills Company’s 10% Coupon Interest Rate, 10-Year Maturity, $1,000 Par, January 1, 2014, Issue Date, Paying Annual Interest)
  487. Time to Maturity and Bond Values
  488. Constant Required Returns
  489. Example 6.10
  490. FIGURE 6.5 Time to Maturity and Bond Values
  491. Changing Required Returns
  492. Example 6.11
  493. YIELD TO MATURITY (YTM)
  494. Personal Finance Example 6.12
  495. SEMIANNUAL INTEREST AND BOND VALUES
  496. Example 6.13
  497. REVIEW QUESTIONS
  498. EXCEL REVIEW QUESTIONS
  499. Summary
  500. FOCUS ON VALUE
  501. REVIEW OF LEARNING GOALS
  502. Self-Test Problems
  503. Warm-Up Exercises
  504. Problems
  505. Spreadsheet Exercise
  506. TO DO
  507. MyFinanceLab
  508. 7 Stock Valuation
  509. Learning Goals
  510. Why This Chapter Matters to You
  511. 7.1 Differences between Debt and Equity
  512. VOICE IN MANAGEMENT
  513. CLAIMS ON INCOME AND ASSETS
  514. Matter of fact
  515. TABLE 7.1 Key Differences between Debt and Equity
  516. MATURITY
  517. TAX TREATMENT
  518. REVIEW QUESTION
  519. 7.2 Common and Preferred Stock
  520. COMMON STOCK
  521. Ownership
  522. Par Value
  523. Preemptive Rights
  524. Authorized, Outstanding, and Issued Shares
  525. Example 7.1
  526. Voting Rights
  527. Dividends
  528. International Stock Issues
  529. Matter of fact
  530. PREFERRED STOCK
  531. Basic Rights of Preferred Stockholders
  532. Features of Preferred Stock
  533. Restrictive Covenants
  534. Cumulation
  535. Other Features
  536. ISSUING COMMON STOCK
  537. Venture Capital
  538. Organization and Investment Stages
  539. TABLE 7.2 Organization of Venture Capital Investors
  540. Deal Structure and Pricing
  541. Going Public
  542. FIGURE 7.1 Cover of a Preliminary Prospectus for a Stock Issue
  543. The Investment Banker’s Role
  544. REVIEW QUESTIONS
  545. FIGURE 7.2 The Selling Process for a Large Security Issue
  546. 7.3 Common Stock Valuation
  547. MARKET EFFICIENCY
  548. Matter of fact
  549. THE EFFICIENT-MARKET HYPOTHESIS
  550. The Behavioral Finance Challenge
  551. BASIC COMMON STOCK VALUATION EQUATION
  552. in practice focus on PRACTICE: Understanding Human Behavior Helps Us Understand Investor Behavior
  553. Zero-Growth Model
  554. Personal Finance Example 7.2
  555. Preferred Stock Valuation
  556. Constant-Growth Model
  557. Example 7.3
  558. Variable-Growth Model
  559. Personal Finance Example 7.4
  560. TABLE 7.3 Calculation of Present Value of Warren Industries Dividends (2016–2018)
  561. FREE CASH FLOW VALUATION MODEL
  562. Example 7.5
  563. TABLE 7.4 Dewhurst, Inc.’s, Data for the Free Cash Flow Valuation Model
  564. TABLE 7.5 Calculation of the Value of the Entire Company for Dewhurst, Inc.
  565. OTHER APPROACHES TO COMMON STOCK VALUATION
  566. Book Value
  567. Example 7.6
  568. Liquidation Value
  569. Example 7.7
  570. Price/Earnings (P/E) Multiples
  571. Personal Finance Example 7.8
  572. Matter of fact
  573. REVIEW QUESTIONS
  574. 7.4 Decision Making and Common Stock Value
  575. FIGURE 7.3 Decision Making and Stock Value
  576. CHANGES IN EXPECTED DIVIDENDS
  577. Example 7.9
  578. CHANGES IN RISK
  579. Example 7.10
  580. COMBINED EFFECT
  581. Example 7.11
  582. REVIEW QUESTIONS
  583. Summary
  584. FOCUS ON VALUE
  585. REVIEW OF LEARNING GOALS
  586. Self-Test Problems
  587. Warm-Up Exercises
  588. Problems
  589. Spreadsheet Exercise
  590. TO DO
  591. MyFinanceLab
  592. Part 4 Risk and the Required Rate of Return
  593. Chapters in This Part
  594. 8 Risk and Return
  595. Learning Goals
  596. Why This Chapter Matters to You
  597. 8.1 Risk and Return Fundamentals
  598. RISK DEFINED
  599. in practice focus on ETHICS: If It Seems Too Good to Be True, It Probably Is
  600. RETURN DEFINED
  601. Example 8.1
  602. TABLE 8.1 Historical Returns on Selected Investments (1900–2011)
  603. RISK PREFERENCES
  604. REVIEW QUESTIONS
  605. 8.2 Risk of a Single Asset
  606. RISK ASSESSMENT
  607. Scenario Analysis
  608. Example 8.2
  609. TABLE 8.2 Assets A and B
  610. Probability Distributions
  611. Matter of fact
  612. Example 8.3
  613. FIGURE 8.1 Bar Charts
  614. RISK MEASUREMENT
  615. FIGURE 8.2 Continuous Probability Distributions
  616. Standard Deviation
  617. Example 8.4
  618. TABLE 8.3 Expected Values of Returns for Assets A and B
  619. Example 8.5
  620. TABLE 8.4 The Calculation of the Standard Deviation of the Returns for Assets A and B
  621. TABLE 8.5 Historical Returns and Standard Deviations on Selected Investments (1900–2011)
  622. Historical Returns and Risk
  623. Matter of fact
  624. Normal Distribution
  625. FIGURE 8.3 Bell-Shaped Curve
  626. Example 8.6
  627. Coefficient of Variation: Trading off Risk and Return
  628. Example 8.7
  629. Personal Finance Example 8.8
  630. REVIEW QUESTIONS
  631. 8.3 Risk of a Portfolio
  632. PORTFOLIO RETURN AND STANDARD DEVIATION
  633. Example 8.9
  634. Example 8.10
  635. TABLE 8.6 Expected Return, Expected Value, and Standard Deviation of Returns for Portfolio XY
  636. CORRELATION
  637. DIVERSIFICATION
  638. FIGURE 8.4 Correlations
  639. FIGURE 8.5 Diversification
  640. Example 8.11
  641. TABLE 8.7 Forecasted Returns, Expected Values, and Standard Deviations for Assets X, Y, and Z and Portfolios XY and XZ
  642. CORRELATION, DIVERSIFICATION, RISK, AND RETURN
  643. Example 8.12
  644. FIGURE 8.6 Possible Correlations
  645. INTERNATIONAL DIVERSIFICATION
  646. Returns from International Diversification
  647. Risks of International Diversification
  648. REVIEW QUESTIONS
  649. 8.4 Risk and Return: The Capital Asset Pricing Model (CAPM)
  650. TYPES OF RISK
  651. THE MODEL: CAPM
  652. FIGURE 8.7 Risk Reduction
  653. Beta Coefficient
  654. Deriving Beta from Return Data
  655. FIGURE 8.8 Beta Derivationa
  656. TABLE 8.8 Selected Beta Coefficients and Their Interpretations
  657. Interpreting Betas
  658. TABLE 8.9 Beta Coefficients for Selected Stocks (May 20, 2013)
  659. Portfolio Betas
  660. Personal Finance Example 8.13
  661. TABLE 8.10 Mario Austino’s Portfolios V and W
  662. The Equation
  663. Historical Risk Premiums
  664. Example 8.14
  665. The Graph: The Security Market Line (SML)
  666. Example 8.15
  667. FIGURE 8.9 Security Market Line
  668. Shifts in the Security Market Line
  669. Changes in Inflationary Expectations
  670. Example 8.16
  671. Changes in Risk Aversion
  672. FIGURE 8.10 Inflation Shifts SML
  673. Example 8.17
  674. Some Comments on the CAPM
  675. FIGURE 8.11 Risk Aversion Shifts SML
  676. REVIEW QUESTIONS
  677. Summary
  678. FOCUS ON VALUE
  679. REVIEW OF LEARNING GOALS
  680. Self-Test Problems
  681. Warm-up Exercises
  682. Problems
  683. Spreadsheet Exercise
  684. To Do
  685. MyFinanceLab
  686. 9 The Cost of Capital
  687. Learning Goals
  688. Why This Chapter Matters to You
  689. 9.1 Overview of the Cost of Capital
  690. THE BASIC CONCEPT
  691. Example 9.1
  692. SOURCES OF LONG-TERM CAPITAL
  693. REVIEW QUESTIONS
  694. 9.2 Cost of Long-Term Debt
  695. NET PROCEEDS
  696. Example 9.2
  697. BEFORE-TAX COST OF DEBT
  698. Using Market Quotations
  699. Calculating the Cost
  700. Example 9.3
  701. Approximating the Cost
  702. Example 9.4
  703. AFTER-TAX COST OF DEBT
  704. Example 9.5
  705. Personal Finance Example 9.6
  706. REVIEW QUESTIONS
  707. EXCEL REVIEW QUESTION
  708. 9.3 Cost of Preferred Stock
  709. PREFERRED STOCK DIVIDENDS
  710. CALCULATING THE COST OF PREFERRED STOCK
  711. Example 9.7
  712. REVIEW QUESTION
  713. 9.4 Cost of Common Stock
  714. FINDING THE COST OF COMMON STOCK EQUITY
  715. Using the Constant-Growth Valuation (Gordon Growth) Model
  716. Example 9.8
  717. Using the Capital Asset Pricing Model (CAPM)
  718. Example 9.9
  719. Comparing Constant-Growth and CAPM Techniques
  720. COST OF RETAINED EARNINGS
  721. Example 9.10
  722. Matter of fact
  723. COST OF NEW ISSUES OF COMMON STOCK
  724. Example 9.11
  725. REVIEW QUESTIONS
  726. 9.5 Weighted Average Cost of Capital
  727. CALCULATING WEIGHTED AVERAGE COST OF CAPITAL (WACC)
  728. Example 9.12
  729. WEIGHTING SCHEMES
  730. Book Value versus Market Value
  731. TABLE 9.1 Calculation of the Weighted Average Cost of Capital for Duchess Corporation
  732. in practice focus on PRACTICE: Uncertain Times Make for an Uncertain Weighted Average Cost of Capital
  733. Historical versus Target Weights
  734. Personal Finance Example 9.13
  735. REVIEW QUESTIONS
  736. Summary
  737. FOCUS ON VALUE
  738. REVIEW OF LEARNING GOALS
  739. Self-Test Problem
  740. Warm-Up Exercises
  741. Problems
  742. Spreadsheet Exercise
  743. TO DO
  744. MyFinanceLab
  745. Part 5 Long-Term Investment Decisions
  746. Chapters in This Part
  747. 10 Capital Budgeting Techniques
  748. Learning Goals
  749. Why This Chapter Matters to You
  750. 10.1 Overview of Capital Budgeting
  751. MOTIVES FOR CAPITAL EXPENDITURE
  752. STEPS IN THE PROCESS
  753. BASIC TERMINOLOGY
  754. Independent versus Mutually Exclusive Projects
  755. Unlimited Funds versus Capital Rationing
  756. Accept–Reject versus Ranking Approaches
  757. CAPITAL BUDGETING TECHNIQUES
  758. Bennett Company’s Relevant Cash Flows
  759. REVIEW QUESTION
  760. 10.2 Payback Period
  761. TABLE 10.1 Capital Expenditure Data for Bennett Company
  762. FIGURE 10.1 Bennett Company’s Projects A and B
  763. DECISION CRITERIA
  764. Example 10.1
  765. PROS AND CONS OF PAYBACK ANALYSIS
  766. Matter of fact
  767. Personal Finance Example 10.2
  768. TABLE 10.2 Relevant Cash Flows and Payback Periods for DeYarman man Enterprises’ Projects
  769. Example 10.3
  770. Example 10.4
  771. TABLE 10.3 Calculation of the Payback Period for Rashid Company’s Two Alternative Investment Projects
  772. REVIEW QUESTIONS
  773. 10.3 Net Present Value (NPV)
  774. DECISION CRITERIA
  775. Example 10.5
  776. FIGURE 10.2 Calculation of NPVs for Bennett Company’s Capital Expenditure Alternatives
  777. Project A
  778. Project B
  779. NPV AND THE PROFITABILITY INDEX
  780. Example 10.6
  781. NPV AND ECONOMIC VALUE ADDED
  782. Example 10.7
  783. REVIEW QUESTIONS
  784. EXCEL REVIEW QUESTION
  785. 10.4 Internal Rate of Return (IRR)
  786. DECISION CRITERIA
  787. CALCULATING THE IRR
  788. Example 10.8
  789. FIGURE 10.3 Calculation of IRRs for Bennett Company’s Capital Expenditure Alternatives
  790. Personal Finance Example 10.9
  791. REVIEW QUESTIONS
  792. EXCEL REVIEW QUESTION
  793. 10.5 Comparing NPV and IRR Techniques
  794. NET PRESENT VALUE PROFILES
  795. Example 10.10
  796. TABLE 10.4 Discount Rate–NPV Coordinates for Projects A and B
  797. FIGURE 10.4 NPV Profiles
  798. CONFLICTING RANKINGS
  799. Reinvestment Assumption
  800. Example 10.11
  801. TABLE 10.5 Reinvestment Rate Comparisons for a Project
  802. TABLE 10.6 Project Cash Flows after Reinvestment
  803. Timing of the Cash Flow
  804. TABLE 10.7 Ranking Projects A and B Using IRR and NPV Methods
  805. Magnitude of the Initial Investment
  806. WHICH APPROACH IS BETTER?
  807. Theoretical View
  808. Practical View
  809. Matter of fact
  810. in practice focus on ETHICS: Nonfinancial Considerations in Project Selection
  811. REVIEW QUESTIONS
  812. Summary
  813. FOCUS ON VALUE
  814. REVIEW OF LEARNING GOALS
  815. Self-Test Problem
  816. Warm-up Exercises
  817. Problems
  818. Spreadsheet Exercise
  819. TO DO
  820. MyFinanceLab
  821. 11 Capital Budgeting Cash Flows and Risk Refinements
  822. Learning Goals
  823. Why This Chapter Matters to You
  824. 11.1 Relevant Cash Flows
  825. in practice focus on ETHICS: A Question of Accuracy
  826. MAJOR CASH FLOW COMPONENTS
  827. EXPANSION VERSUS REPLACEMENT DECISIONS
  828. FIGURE 11.1 Cash Flow Components
  829. FIGURE 11.2 Relevant Cash Flows for Replacement Decisions
  830. SUNK COSTS AND OPPORTUNITY COSTS
  831. Example 11.1
  832. Matter of fact
  833. REVIEW QUESTIONS
  834. 11.2 Finding the Initial Investment
  835. INSTALLED COST OF NEW ASSET
  836. TABLE 11.1 The Basic Format for Determining Initial Investment
  837. AFTER-TAX PROCEEDS FROM SALE OF OLD ASSET
  838. Book Value
  839. Example 11.2
  840. Basic Tax Rules
  841. Example 11.3
  842. TABLE 11.2 Tax Treatment on Sales of Assets
  843. The sale of the asset for more than its book value
  844. FIGURE 11.3 Taxable Income from Sale of Asset
  845. The sale of the asset for its book value
  846. The sale of the asset for less than its book value
  847. CHANGE IN NET WORKING CAPITAL
  848. Matter of fact
  849. Example 11.4
  850. TABLE 11.3 Calculation of Change in Net Working Capital for Danson Company
  851. CALCULATING THE INITIAL INVESTMENT
  852. Example 11.5
  853. REVIEW QUESTIONS
  854. 11.3 Finding the Operating Cash Flows
  855. INTERPRETING THE TERM AFTER-TAX
  856. INTERPRETING THE TERM CASH FLOWS
  857. Example 11.6
  858. TABLE 11.4 Powell Corporation’s Revenue and Expenses (Excluding Depreciation and Interest) for Proposed and Present Machines
  859. TABLE 11.5 Depreciation Expense for Proposed and Present Machines for Powell Corporation
  860. TABLE 11.6 Calculation of Operating Cash Flows Using the Income Statement Format
  861. TABLE 11.7 Calculation of Operating Cash Flows for Powell Corporation’s Proposed and Present Machines
  862. INTERPRETING THE TERM INCREMENTAL
  863. TABLE 11.8 Incremental (Relevant) Operating Cash Flows for Powell Corporation
  864. Example 11.7
  865. REVIEW QUESTIONS
  866. 11.4 Finding the Terminal Cash Flow
  867. PROCEEDS FROM SALE OF ASSETS
  868. TAXES ON SALE OF ASSETS
  869. TABLE 11.9 The Basic Format for Determining Terminal Cash Flow
  870. CHANGE IN NET WORKING CAPITAL
  871. Example 11.8
  872. REVIEW QUESTION
  873. 11.5 Risk in Capital Budgeting (Behavioral Approaches)
  874. TABLE 11.10 Relevant Cash Flows and NPVs for Bennett Company’s Projects
  875. BREAKEVEN ANALYSIS
  876. Example 11.9
  877. SCENARIO ANALYSIS
  878. Example 11.10
  879. TABLE 11.11 Scenario Analysis of Treadwell’s Projects A and B
  880. SIMULATION
  881. FIGURE 11.4 NPV Simulation
  882. REVIEW QUESTIONS
  883. EXCEL REVIEW QUESTION MyFinanceLab
  884. 11.6 Risk-Adjusted Discount Rates
  885. DETERMINING RISK-ADJUSTED DISCOUNT RATES (RADRS)
  886. Personal Finance Example 11.11
  887. Review of CAPM
  888. Using CAPM to Find RADRs
  889. FIGURE 11.5 CAPM and SML
  890. Example 11.12
  891. APPLYING RADRS
  892. Example 11.13
  893. FIGURE 11.6 Calculation of NPVS for Bennett Company’s Capital Expenditure Alternatives Using RADRs
  894. PORTFOLIO EFFECTS
  895. RADRS IN PRACTICE
  896. TABLE 11.12 Bennett Company’s Risk Classes and RADRs
  897. Example 11.14
  898. REVIEW QUESTIONS
  899. 11.7 Capital Budgeting Refinements
  900. COMPARING PROJECTS WITH UNEQUAL LIVES
  901. The Problem
  902. Example 11.15
  903. Annualized Net Present Value (ANPV) Approach
  904. Example 11.16
  905. RECOGNIZING REAL OPTIONS
  906. TABLE 11.13 Major Types of Real Options
  907. Example 11.17
  908. CAPITAL RATIONING
  909. Internal Rate of Return Approach
  910. Example 11.18
  911. FIGURE 11.7 Investment Opportunities Schedule
  912. Net Present Value Approach
  913. Example 11.19
  914. TABLE 11.14 Rankings for Tate Company Projects
  915. REVIEW QUESTIONS
  916. EXCEL REVIEW QUESTION MyFinanceLab
  917. Summary
  918. REVIEW OF LEARNING GOALS
  919. Self-Test Problems
  920. Warm-Up Exercises
  921. Problems
  922. Risk Classes and RADRs
  923. Spreadsheet Exercise
  924. TO DO
  925. MyFinanceLab
  926. Part 6 Long-Term Financial Decisions
  927. Chapters in This Part
  928. 12 Leverage and Capital Structure
  929. Learning Goals
  930. Why This Chapter Matters to You
  931. 12.1 Leverage
  932. TABLE 12.1 General Income Statement Format and Types of Leverage
  933. BREAKEVEN ANALYSIS
  934. Algebraic Approach
  935. TABLE 12.2 Operating Leverage, Costs, and Breakeven Analysis
  936. Example 12.1
  937. FIGURE 12.1 Breakeven Analysis
  938. Graphical Approach
  939. Changing Costs and the Operating Breakeven Point
  940. TABLE 12.3 Sensitivity of Operating Breakeven Point to Increases in Key Breakeven Variables
  941. Example 12.2
  942. Personal Finance Example 12.3
  943. FIGURE 12.2 Operating Leverage
  944. OPERATING LEVERAGE
  945. Example 12.4
  946. TABLE 12.4 The EBIT for Various Sales Levels
  947. Measuring the Degree of Operating Leverage (DOL)
  948. Example 12.5
  949. Example 12.6
  950. in practice focus on PRACTICE: Adobe’s Leverage
  951. Fixed Costs and Operating Leverage
  952. Example 12.7
  953. FINANCIAL LEVERAGE
  954. TABLE 12.5 Operating Leverage and Increased Fixed Costs
  955. Example 12.8
  956. TABLE 12.6 The EPS for Various EBIT Levelsa
  957. Measuring the Degree of Financial Leverage (DFL)
  958. Example 12.9
  959. Personal Finance Example 12.10
  960. Example 12.11
  961. TOTAL LEVERAGE
  962. Example 12.12
  963. TABLE 12.7 The Total Leverage Effect
  964. Measuring the Degree of Total Leverage (DTL)
  965. Example 12.13
  966. Example 12.14
  967. Relationship of Operating, Financial, and Total Leverage
  968. Example 12.15
  969. REVIEW QUESTIONS
  970. 12.2 The Firm’s Capital Structure
  971. TYPES OF CAPITAL
  972. EXTERNAL ASSESSMENT OF CAPITAL STRUCTURE
  973. TABLE 12.8 Median Debt Ratios for Selected Industries (Fiscal Year 2011)
  974. Personal Finance Example 12.16
  975. CAPITAL STRUCTURE OF NON–U.S. FIRMS
  976. Matter of fact
  977. CAPITAL STRUCTURE THEORY
  978. Tax Benefits
  979. Probability of Bankruptcy
  980. Business Risk
  981. Example 12.17
  982. TABLE 12.9 Sales and Associated EBIT Calculations for Cooke Company ($000)
  983. Total Risk
  984. Example 12.18
  985. TABLE 12.10 Capital Structures Associated with Alternative Debt Ratios for Cooke Company
  986. TABLE 12.11 Level of Debt, Interest Rate, and Dollar Amount of Annual Interest Associated with Cooke Company’s Alternative Capital Structures
  987. TABLE 12.12 Calculation of EPS for Selected Debt Ratios ($000) for Cooke Company
  988. TABLE 12.13 Expected EPS, Standard Deviation, and Coefficient of Variation for Alternative Capital Structures for Cooke Company
  989. FIGURE 12.3 Probability Distributions
  990. FIGURE 12.4 Expected EPS and Coefficient of Variation of EPS
  991. Agency Costs Imposed by Lenders
  992. Asymmetric Information
  993. Pecking Order Theory
  994. Signaling Theory
  995. OPTIMAL CAPITAL STRUCTURE
  996. FIGURE 12.5 Cost Functions and Value
  997. Cost Functions
  998. Graphical View of Optimal Structure
  999. REVIEW QUESTIONS
  1000. 12.3 EbIT–EPS Approach to Capital Structure
  1001. PRESENTING A FINANCING PLAN GRAPHICALLY
  1002. Data Required
  1003. Example 12.19
  1004. Plotting the Data
  1005. FIGURE 12.6 EBIT–EPS Approach
  1006. COMPARING ALTERNATIVE CAPITAL STRUCTURES
  1007. Example 12.20
  1008. CONSIDERING RISK IN EBIT–EPS ANALYSIS
  1009. Example 12.21
  1010. BASIC SHORTCOMING OF EBIT–EPS ANALYSIS
  1011. REVIEW QUESTION
  1012. 12.4 Choosing the Optimal Capital Structure
  1013. LINKAGE
  1014. TABLE 12.14 Required Returns for Cooke Company’s Alternative Capital Structures
  1015. Example 12.22
  1016. ESTIMATING VALUE
  1017. Example 12.23
  1018. TABLE 12.15 Calculation of Share Value Estimates Associated with Alternative Capital Structures for Cooke Company
  1019. MAXIMIZING VALUE VERSUS MAXIMIZING EPS
  1020. FIGURE 12.7 Estimating Value
  1021. Example 12.24
  1022. SOME OTHER IMPORTANT CONSIDERATIONS
  1023. TABLE 12.16 Important Factors to Consider in Making Capital Structure Decisions
  1024. REVIEW QUESTIONS
  1025. Summary
  1026. FOCUS ON VALUE
  1027. REVIEW OF LEARNING GOALS
  1028. Self-Test Problems
  1029. Warm-Up Exercises
  1030. Problems
  1031. Spreadsheet Exercise
  1032. TO DO
  1033. MyFinanceLab
  1034. 13 Payout Policy
  1035. Learning Goals
  1036. Why This Chapter Matters to You
  1037. 13.1 The Basics of Payout Policy
  1038. ELEMENTS OF PAYOUT POLICY
  1039. TRENDS IN EARNINGS AND DIVIDENDS
  1040. FIGURE 13.1 Per Share Earnings and Dividends of the S&P 500 Index
  1041. Matter of fact
  1042. TRENDS IN DIVIDENDS AND SHARE REPURCHASES
  1043. FIGURE 13.2 Aggregate Dividends and Repurchases for All U.S.–Listed Companies
  1044. in practice focus on ETHICS: Are Buybacks Really a Bargain?
  1045. Matter of fact
  1046. REVIEW QUESTIONS
  1047. 13.2 The Mechanics of Payout Policy
  1048. FIGURE 13.3 U.S. Public Industrial Firms Increasing, Decreasing, or Maintaining Dividends
  1049. CASH DIVIDEND PAYMENT PROCEDURES
  1050. Example 13.1
  1051. FIGURE 13.4 Dividend Payment Time Line
  1052. SHARE REPURCHASE PROCEDURES
  1053. Example 13.2
  1054. TAX TREATMENT OF DIVIDENDS AND REPURCHASES
  1055. Personal Finance Example 13.3
  1056. DIVIDEND REINVESTMENT PLANS
  1057. STOCK PRICE REACTIONS TO CORPORATE PAYOUTS
  1058. REVIEW QUESTIONS
  1059. 13.3 Relevance of Payout Policy
  1060. RESIDUAL THEORY OF DIVIDENDS
  1061. THE DIVIDEND IRRELEVANCE THEORY
  1062. ARGUMENTS FOR DIVIDEND RELEVANCE
  1063. REVIEW QUESTIONS
  1064. 13.4 Factors Affecting Dividend Policy
  1065. LEGAL CONSTRAINTS
  1066. Example 13.4
  1067. Example 13.5
  1068. CONTRACTUAL CONSTRAINTS
  1069. GROWTH PROSPECTS
  1070. OWNER CONSIDERATIONS
  1071. MARKET CONSIDERATIONS
  1072. REVIEW QUESTION
  1073. 13.5 Types of Dividend Policies
  1074. CONSTANT-PAYOUT-RATIO DIVIDEND POLICY
  1075. Example 13.6
  1076. REGULAR DIVIDEND POLICY
  1077. Example 13.7
  1078. LOW-REGULAR-AND-EXTRA DIVIDEND POLICY
  1079. REVIEW QUESTION
  1080. 13.6 Other Forms of Dividends
  1081. STOCK DIVIDENDS
  1082. Accounting Aspects
  1083. Example 13.8
  1084. Shareholder’s Viewpoint
  1085. Example 13.9
  1086. The Company’s Viewpoint
  1087. STOCK SPLITS
  1088. Example 13.10
  1089. Personal Finance Example 13.11
  1090. REVIEW QUESTIONS
  1091. Summary
  1092. FOCUS ON VALUE
  1093. REVIEW OF LEARNING GOALS
  1094. Self-Test Problem
  1095. Warm-Up Exercises
  1096. Problems
  1097. Spreadsheet Exercise
  1098. TO DO
  1099. MyFinanceLab
  1100. Part 7 Short-Term Financial Decisions
  1101. Chapters in This Part
  1102. 14 Working Capital and Current Assets Management
  1103. Learning Goals
  1104. Why This Chapter Matters to You
  1105. 14.1 Net Working Capital Fundamentals
  1106. WORKING CAPITAL MANAGEMENT
  1107. Matter of fact
  1108. NET WORKING CAPITAL
  1109. TRADE-OFF BETWEEN PROFITABILITY AND RISK
  1110. Changes in Current Assets
  1111. TABLE 14.1 Effects of Changing Ratios on Profits and Risk
  1112. FIGURE 14.1 Yearly Medians for All U.S.–Listed Manufacturing Companies
  1113. Changes in Current Liabilities
  1114. REVIEW QUESTIONS
  1115. 14.2 Cash Conversion Cycle
  1116. CALCULATING THE CASH CONVERSION CYCLE
  1117. Matter of fact
  1118. Example 14.1
  1119. FUNDING REQUIREMENTS OF THE CASH CONVERSION CYCLE
  1120. FIGURE 14.2 Time Line for Whirlpool’s Cash Conversion Cycle
  1121. Permanent versus Seasonal Funding Needs
  1122. Example 14.2
  1123. FIGURE 14.3 Semper Pump Company’s Total Funding Requirements
  1124. Aggressive versus Conservative Seasonal Funding Strategies
  1125. Example 14.3
  1126. STRATEGIES FOR MANAGING THE CASH CONVERSION CYCLE
  1127. REVIEW QUESTIONS
  1128. 14.3 Inventory Management
  1129. DIFFERING VIEWPOINTS ABOUT INVENTORY LEVEL
  1130. COMMON TECHNIQUES FOR MANAGING INVENTORY
  1131. ABC System
  1132. Economic Order Quantity (EOQ) Model
  1133. Mathematical Development of EOQ
  1134. Personal Finance Example 14.4
  1135. Reorder Point
  1136. Example 14.5
  1137. Just-in-Time (JIT) System
  1138. in practice focus on PRACTICE: RFID: The Wave of the Future?
  1139. Computerized Systems for Resource Control
  1140. INTERNATIONAL INVENTORY MANAGEMENT
  1141. REVIEW QUESTIONS
  1142. 14.4 Accounts Receivable Management
  1143. CREDIT SELECTION AND STANDARDS
  1144. Five C’s of Credit
  1145. Credit Scoring
  1146. Changing Credit Standards
  1147. Example 14.6
  1148. Making the Credit Standard Decision
  1149. Example 14.7
  1150. Managing International Credit
  1151. TABLE 14.2 Effects on Dodd Tool of a Relaxation of Credit Standards
  1152. CREDIT TERMS
  1153. Cash Discount
  1154. Example 14.8
  1155. TABLE 14.3 Analysis of Initiating a Cash Discount for MAX Company
  1156. Cash Discount Period
  1157. Credit Period
  1158. CREDIT MONITORING
  1159. Average Collection Period
  1160. Aging of Accounts Receivable
  1161. Example 14.9
  1162. Popular Collection Techniques
  1163. TABLE 14.4 Popular Collection Techniques
  1164. REVIEW QUESTIONS
  1165. 14.5 Management of Receipts and Disbursements
  1166. FLOAT
  1167. SPEEDING UP COLLECTIONS
  1168. Matter of fact
  1169. SLOWING DOWN PAYMENTS
  1170. CASH CONCENTRATION
  1171. ZERO-BALANCE ACCOUNTS
  1172. Personal Finance Example 14.10
  1173. INVESTING IN MARKETABLE SECURITIES
  1174. REVIEW QUESTIONS
  1175. TABLE 14.5 Features of Popular Marketable Securities
  1176. Summary
  1177. FOCUS ON VALUE
  1178. REVIEW OF LEARNING GOALS
  1179. Self-Test Problems
  1180. Warm-Up Exercises
  1181. Problems
  1182. Spreadsheet Exercise
  1183. TO DO
  1184. MyFinanceLab
  1185. 15 Current Liabilities Management
  1186. Learning Goals
  1187. Why This Chapter Matters to You
  1188. 15.1 Spontaneous Liabilities
  1189. ACCOUNTS PAYABLE MANAGEMENT
  1190. Role in the Cash Conversion Cycle
  1191. Example 15.1
  1192. Analyzing Credit Terms
  1193. Taking the Cash Discount
  1194. Example 15.2
  1195. Giving Up the Cash Discount
  1196. FIGURE 15.1 Payment Options
  1197. Example 15.3
  1198. Using the Cost of Giving Up a Cash Discount in Decision Making
  1199. Example 15.4
  1200. TABLE 15.1 Cash Discounts and Associated Costs for Mason Products
  1201. Effects of Stretching Accounts Payable
  1202. Example 15.5
  1203. Personal Finance Example 16.6
  1204. ACCRUALS
  1205. in practice focus on ETHICS: Accruals Management
  1206. Example 15.7
  1207. REVIEW QUESTIONS
  1208. 15.2 Unsecured Sources of Short-Term Loans
  1209. BANK LOANS
  1210. Loan Interest Rates
  1211. Fixed- and Floating-Rate Loans
  1212. Method of Computing Interest
  1213. Example 15.8
  1214. Single-Payment Notes
  1215. Example 15.9
  1216. Personal Finance Example 15.10
  1217. Lines of Credit
  1218. Interest Rates
  1219. Operating-Change Restrictions
  1220. Compensating Balances
  1221. Example 15.11
  1222. Annual Cleanups
  1223. Revolving Credit Agreements
  1224. Example 15.12
  1225. COMMERCIAL PAPER
  1226. Interest on Commercial Paper
  1227. Example 15.13
  1228. Matter of fact
  1229. INTERNATIONAL LOANS
  1230. International Transactions
  1231. Financing International Trade
  1232. Transactions between Subsidiaries
  1233. REVIEW QUESTIONS
  1234. 15.3 Secured Sources of Short-Term Loans
  1235. CHARACTERISTICS OF SECURED SHORT-TERM LOANS
  1236. Collateral and Terms
  1237. Institutions Extending Secured Short-Term Loans
  1238. USE OF ACCOUNTS RECEIVABLE AS COLLATERAL
  1239. Pledging Accounts Receivable
  1240. The Pledging Process
  1241. Notification
  1242. Matter of fact
  1243. Pledging Cost
  1244. Factoring Accounts Receivable
  1245. Factoring Agreement
  1246. Matter of fact
  1247. Factoring Cost
  1248. USE OF INVENTORY AS COLLATERAL
  1249. Floating Inventory Liens
  1250. Trust Receipt Inventory Loans
  1251. Warehouse Receipt Loans
  1252. REVIEW QUESTIONS
  1253. Summary
  1254. FOCUS ON VALUE
  1255. REVIEW OF LEARNING GOALS
  1256. Self-Test Problem
  1257. Warm-Up Exercises
  1258. Problems
  1259. Spreadsheet Exercise
  1260. TO DO
  1261. MyFinanceLab
  1262. Back Matter
  1263. Appendix Solutions to Self-Test Problems
  1264. Chapter 1
  1265. Chapter 2
  1266. Chapter 3
  1267. Chapter 4
  1268. Chapter 5
  1269. Chapter 6
  1270. Chapter 7
  1271. Chapter 8
  1272. Chapter 9
  1273. Chapter 10
  1274. Chapter 11
  1275. Chapter 12
  1276. Chapter 13
  1277. Chapter 14
  1278. Chapter 15
  1279. Glossary
  1280. Index
  1281. FREQUENTLY USED SYMBOLS AND ABBREVIATIONS
  1282. MyFinanceLab™
  1283. The Key to Your Success in Three Easy Steps!
  1284. If your instructor assigns homework and tests using MyFinanceLab

 

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