TITLE : FINANCE: ENVIRONMENT AND DECISIONS.*

CONTENTS
 
Preface	v
 
Part 1	The Environment of Business Finance	1
 
Chapter 1	Finance-The Subject  3
 
	Definition of Finance 3
	Scope and Divisions 4
	Study Viewpoints in Finance	7
	Science or Art? 9
	Basic Principles in Finance	10
 
Chapter 2	What Money Is  12
 
	Definition of Money 12
	Money's Four Functions	15
	The Value of Money 17
	Near-Money 19
	Credit and Velocity	21
 
Chapter 3	What Money Does  23
 
	The Equation of Exchange 24
	Kinds and Causes of Inflation	27
	The Cambridge Equation 28
	Income and Asset Circulations	30
 
Chapter 4	How Money Is Created  34
 
	High- and Low-Powered Money	34
	How the Federal Reserve Creates High Powered Money 35
	Multiple Deposit Expansion 37
	The Formulae of Monetary Expansion	39
	Factors Affecting Money Supply:	Reserve Position of the Banks 42
	Role of Gold 45
	Summary 45
 
Chapter 5	Interest and Discount in Financial Valuation  48
 
	Fundamental Considerations 48
	Compound Interest Tables 50
	Market Rates and Debt Securities	55
 
Chapter 6	The Theory of Interest  59
 
	Theories of Interest 59
	Deflated vs. Money Rates of Interest	65
	Interest Rate Response to Inflation	65
	Interest Rate Structures 66
	Patterns of Interest Rate Fluctuation	69
	Forecasting Interest Rate Movements	70
 
Chapter 7	Credit, Securities, and Financial Markets  75
 
	Credit: The Five Cs 75
	Kinds of Credit 76
	Saving, Credit, and Investment	79
	Securities 81
	The Financial Markets 82
	The Money Market 85
	The Capital Market	86
 
Chapter 8	Monetary and Fiscal Policy: The Federal Reserve	90
 
	Objectives of Monetary Policy	91
	Conflicts Among Objectives 91
	The Federal Reserve 92
	Tools of Monetary Management	93
	Selective Tools 95
	Technical Guides to Monetary Policy  97
	Condition of the Banking System 98
	Fiscal Policy	99
	Monetary Policy: Final Assessment	102
 
Chapter 9	What Commercial Banks Do  105
 
	Bank Financial Structure: Some Observations	105
	Bank Management: An Overview	107
	Bank Liabilities 108
	Bank Assets 110
	Bank Earnings 112
	Bank Regulation 112
 
Chapter 10	Non-Bank Intermediaries: Their Role  114
 
	Specialization in Finance 114
	Savi ngs and Loan Associations	117
	Mutual Savings Banks 120
	Other Deposit-Type Intermediaries  120
	Intermediation vs. Money-Creation  121
	Insurance Companies 122
	Other Savings Institutions 123
	Trend Toward Diversification	123
 
Chapter 11	When Money Goes International  126
 
	Foreign Exchange Rates 126
	The Balance of Payments 132
	The Balance of Payments and Monetary Policy	133
 
Chapter 12	The Financial System: A Final View  137
 
	Definition of System 137
	Financial System: Elements in Review 138
	Financial Indicators 142
	Persistent Problems 143
	The System's Adjustment 146
	The Basic Problem	147
 
Part 2	The Financing of Business Firms	149
 
Chapter 13	The Three A's of Financial Management  151
 
	The Changing Role of Financial Management  152
	Anticipating Financial Needs 153
	Acquiring Financial Resources 155
	Allocating Funds in the Business 157
	The Three A's in Review 158
 
Chapter 14	Forms of Enterprise and Business Taxes  160
 
	Forms of Business Enterprise 160
	Tax Management in the Corporation 167
	Capital Gains and Losses	168
 
Chapter 15	Financial Reports and What They Tell You  174
 
	What Financial Reports Contain 174
	The Balance Sheet 174
	The Income Statement 180
	Accumulated Retained Earnings Statement	182
	Sources and Applications of Funds Statement	182
	Financial Statements: Further Aspects	183
 
Chapter 16	Profitability and Turnover  187
 
	Ratio Analysis 187
	Profit and Risk 188
	Profitability Measures 189
	Turnover 193
	Return on Assets 194
 
Chapter 17	Leverage and Liquidity  198
 
	Leverage 198
	Liquidity 206
	Financial Manager's Dilemma	209
 
Chapter 18	Fixed and Circulating Capital: Depreciation	212
 
	What Capital Is 212
	What Depreciation Is 214
	Selecting the Depreciation Method 218
	Relation Between Fixed and Circulating Capital	220
 
Chapter 19	Financial Planning and Control: An Overview  223
 
	Planning 224
	Suitability 226
	Violating Suitability: The Dangers	227
	Control 229
	Reports 230
	Treasurer and Controller Functions	231
 
Chapter 20	Cost of Capital and Other Topics  234
 
	Sources of Funds: Classified	234
	Recent Use of Sources 235
	The Cost of Capital 236
	Availability 242
	Timing 242
	Further Considerations	243
 
Chapter 21	Short-Term Financing: Sources and Costs  246
 
	Sources: Increasing Liabilities 246
	Sources: Decreasing Assets	254
 
Chapter 22	Intermediate-Term Financing and Leasing  257
 
	Term Loans 257
	Conditional Sales Contract 260
	Leasing	260
 
Chapter 23	Long-Term Financing: Corporate Stock  264
 
	Common Stock: Measures of Worth 264
	Rights of a Common Shareholder 267
	New Flotations 270
	Preferred Stock 272
 
Chapter 24	Internal Financing and Dividend Policy  275
 
	Internal Financing 275
	Retained Earnings 276
	Shareholders' Stake in Earnings	276
	Dividend Determinants 277
	Dividend Policy	279
 
Chapter 25	Long-Term Financing: Bonds and Notes  284
 
	Bond Usage 284
	Bond Types 287
	Computing Interest Coverage	290
	Bond Ratings 291
	Bond Sweeteners	292
 
Chapter 26	Capital Allocation and Budgeting  297
 
	Capital Allocation 297
	Costs and Revenues 298
	Marginal Cost and Return: Invested Capital	300
	Capital Cut-Off 302
	Administering Outlays for Long-Lived Assets	303
	Asset Disposal	310
 
Chapter 27	Ranking and Selecting Investment Proposals  312
 
	Profit 312
	Requisites 314
	Methods 314
	Adjusting for Uncertainty	319
	A Misplaced Emphasis	321
	Summary 322
	Appendix	323
 
Chapter 28	Administering Circulating Capital  326
 
	Cash 326
	Accounts Receivable 331
	Inventory	333
 
Chapter 29	Marketing New Security Issues  338
 
	Legal Restrictions 338
	Marketing a New Issue 339
	Placement 339
	Listing Securities	345
 
Chapter 30	Financial Difficulties and Financing Growth  348
 
	Life Cycle of a Firm 348
	Types of Growth 349
	Difficulties Stemming From Internal Growth	349
	External Growth 353
	Financial Difficulties	354
 
Chapter 31	The Money, Bond, and Mortgage Markets	362
 
	The Money Market 362
	The Bond Market 366
	The Mortgage Market	369
 
Chapter 32	The Stock Market  372
 
	Customers of the Stock Market 373
	Over-the-Counter and Listed Markets		373
	Regulation of Stock Trading 375
	Stock Market Behavior 376
	Two Principles of Market Pricing 378
	Margin Trading and Short Selling 380
	Patterns of Stock Prices Through Time  381
	Demand for Stocks 382
	Short-Period Price Changes in Stocks  383
	Stock Selection and Timing 383
	The Market's Role in the Economy  386
 
Chapter 33	The Business Cycle  388
 
	The Business Cycle 388
	The Financial Manager and the Cycle	389
	Business Cycle Theories 389
	Cycle Phases 391
	Are There "Super Cycles"? 396
	Financing Tactics Over the Cycle	396
 
Chapter 34	Financing InternationalBusiness Transactions  399
 
	Foreign Exchange Markets 400
	Spot and Forward Exchange Markets 403
	International Investment and Interest Arbitrage	406
 
Appendixes  411
 
Glossary 413
 
Tables 419
 
Index	429