TITLE : FINANCE.

 
Contents
 
Preface
 
Chapter 1 Introduction to the World of Finance  2
Finance Courses
Purpose of This Text
Plan of the Text
 
Part One The Financial Environment  8
 
Chapter 2 Financial Intermediation  10
Money
The Flow of Resources and Payments
Financial Intermediation
Advantages of Financial Intermediaries
An Introduction to Financial Leverage
Summary
 
Chapter 3 The Commercial Banking System  30
A Commercial Bank's Balance Sheet
Commercial Banks' Earnings
Regulation of Commercial Banks
The Expansion of Money and Credit
Summary
 
Chapter 4 The Federal Reserve System  58
The Role of the Federal Reserve System
Structure of the Federal Reserve
Tools of Monetary Policy
The Mechanics of Open Market Operations
Financing the Federal Government's Deficits
Summary
 
Chapter 5 Non-Commercial-Bank Financial Intermediaries and Investment
          Companies  82
Savings and Loan Associations
Other Financial Intermediaries
Investment Companies
Summary
 
Chapter 6 The Role of Security Markets  104
The Issuing and Selling of New Securities
Security Transactions
Security Exchanges
Brokers
Measures of Security Prices
Regulation
The Stock Market and the Banking System
Summary
 
Chapter 7 International Monetary System  134
Balance of Payments
Exchange Rates
Effect on Banks' Reserves
Foreign Trade and Multinational Firms
Summary
Appendix: Oil and the Balance of Trade
 
Chapter 8 The Inflationary Environment  158
Inflation
The Traditional Explanations of Inflation
The Problem of Recession and Unemployment
Inflation and Financial Decision Making
Overview of the Financial System
Summary
 
Part Two Tools of Managerial Finance  174
 
Chapter 9 Corporations, Taxes, and the Role of the Financial
          Manager 176
Types of Businesses
Taxes and the Decision to Incorporate
The Role of the Financial Manager:
     Maximization of the Value of the Firm
The Components of the Financial Manager's Job
Summary
 
Chapter 10 Financial Statements  196
The Balance Sheet
The Income Statement
The Statement of Retained Earnings
The Statement of Changes in Financial Position
The Role of the Auditor
Limitations of Accounting Data
Summary
 
Chapter 11 Depreciation and Tax Credits  216
Expansion of Fixed Assets
Depreciation
Accelerated Depreciation
Methods of Depreciation Compared
The Tax Credit
Summary
 
Chapter 12 Ratio Analysis  232
Types of Ratios
Liquidity Ratios
Activity Ratios
Profitability Ratios
Leverage Ratios
Application of Ratio Analysis
Summary
Summary of Ratio Definitions
Case Study
 
Chapter 13 The Time Value of Money  262
The Compound Value of a Dollar
The Present Value of a Dollar
Sum of an Annuity
The Present Value of an Annuity
Applications of Compounding and Discounting
Nonannual Compounding
Summary
 
Chapter 14 Risk  284
Sources of Risk
The Expected Retum on an Investment
Measures of Risk
Summary
 
Part Three  Working Capital   306
 
Chapter 15 Working Capital: Sources of Short-Term Debt  308
Working Capital
Commercial Bank Loans
Trade Credit
Commercial Paper
Secured Loans
Summary
Appendix: Determination of the True Cost of Trade Credit
 
Chapter 16 Working Capital: Management of Short-Term Assets  340
The Inventory Cycle
The Economic Order Quantity
Inventory Valuation
Management of Accounts Receivable
Cash Management
Summary
 
 
Chapter 17 Planning: Forecasting and Budgeting  362
Percent of Sales
Regression Analysis
Cash Budget
Summary
Appendix: Regression Analysis and the Estimation of
Beta Coefficients
 
Part Four  Long-Term Investment Decisions  386
 
Chapter 18 Sources of Funds: Long-Term Debt (Bonds)  388
Characteristics of All Debt Instruments
Types of Bonds
Characteristics of Bonds
Yields
Retiring Debt
Summary
 
Chapter 19 Alternatives to Long-Term Debt: Intermediate-Term Debt,
           Leasing, and Preferred Stock  416
Intermediate-Term Debt
Leasing
Preferred Stock
Summary
 
Chapter 20 Sources of Funds: Equity  438
The Rights of Stockholders
Dividend Policy
Cash Dividends
Stock Dividends
Stock Splits
Dividend Reinvestment Plans
Repurchase of Stock
Valuation: The Present Value of Dividends and the
Growth of Earnings
Risk and Security Valuation
Summary
 
Chapter 21 Planning: Break-even Analysis and Operating Leverage  468
Break-even Analysis
Uses for Break-even Analysis
Limitations of Break-even Analysis
Curvilinear Break-even Analysis
Degree of Operating Leverage
Substitution of Fixed for Variable Costs
Operating Leverage and Risk
Summary
Appendix: The Relationship between the Degree of Operating Leverage
and
          Break-even Analysis
 
Chapter 22 Financial Leverage and the Cost of Capital  494
How Financial Leverage Increases Investors' Rate of Return
Financial Leverage and Risk
Financial Leverage through Preferred Stock Financing
The Degree of Financial Leverage
Combined Financial and Operating Leverage
Cost of Capital
Cost of Debt
Cost of Preferred Stock
Cost of Equity (Common Stock and Retained Earnings)
Cost of Capital: A Weighted Average
Optimal Capital Structure
AT & T's Optimal Capital Structure
Summary
Appendix: Additional Topics in the Cost of Capital
 
Chapter 23 Capital Budgeting  530
Payback Period
Net Present Value and Internal Rate of Return Introduced
Net Present Value
Intemal Rate of Retum
Net Present Value Internal Rate of Return Compared
Ranking Investment Opportunities
Risk
The Replacement Decision
Summary
Appendix: Use of Beta Coefficients in Capital Budgeting
 
Chapter 24 Special Topics: Mergers and Bankruptcy  562
Causes and Types of Mergers
Executing the Merger
Pooling and Purchasing
Bankruptcy and Reorganization
Two Case Studies: W. T. Grant and Elcor Corporatio
Summary
 
Chapter 25 Overview of Financial Management  580
The Role of the Financial Manager Revisited
The Impact of National Economic Policy
The Purpose of the Book Restated
 
Glossary  589
Appendixes: Time Value of Money Tables  600
Index  605