Corporate Finance

Introduction: Contrasts, Shocks, Threats and Opportunities viii
Preface xiv
Frequently used symbols xviii
1 WHAT IS CORPORATE FINANCE? 1
SECTION I
FINANCIAL ANALYSIS 15
PART ONE
FUNDAMENTAL CONCEPTS IN FINANCIAL ANALYSIS 17
2 CASH FLOW 19
3 EARNINGS 29
4 CAPITAL EMPLOYED AND INVESTED CAPITAL 45
5 WALKING THROUGH FROM EARNINGS TO CASH FLOW 58
6 GETTING TO GRIPS WITH CONSOLIDATED ACCOUNTS 73
7 HOW TO COPE WITH THE MOST COMPLEX POINTS IN FINANCIAL ACCOUNTS 92
PART TWO
FINANCIAL ANALYSIS AND FORECASTING 119
8 HOW TO PERFORM A FINANCIAL ANALYSIS 121
9 MARGIN ANALYSIS: STRUCTURE 154
10 MARGIN ANALYSIS: RISKS 176
11 WORKING CAPITAL AND CAPITAL EXPENDITURES 191
12 FINANCING 213
13 RETURN ON CAPITAL EMPLOYED AND RETURN ON EQUITY 227
14 CONCLUSION OF FINANCIAL ANALYSIS 246
SECTION II
INVESTORS AND MARKETS 253
PART ONE
INVESTMENT DECISION RULES 255
15 THE FINANCIAL MARKETS 257
16 THE TIME VALUE OF MONEY AND NET PRESENT VALUE 278
17 THE INTERNAL RATE OF RETURN 295
PART TWO
THE RISK OF SECURITIES AND THE REQUIRED RATE OF RETURN 313
18 RISK AND RETURN 315
19 THE REQUIRED RATE OF RETURN 347
20 THE TERM STRUCTURE OF INTEREST RATES 366
PART THREE
FINANCIAL SECURITIES 377
21 BONDS 379
22 OTHER DEBT PRODUCTS 407
23 SHARES 418
24 OPTIONS 439
25 HYBRID SECURITIES 460
26 SELLING SECURITIES 481
SECTION III
VALUE 511
27 VALUE AND CORPORATE FINANCE 513
28 MEASURING VALUE CREATION 532
29 INVESTMENT CRITERIA 551
30 THE COST OF CAPITAL 569
31 RISK AND INVESTMENT ANALYSIS 587
32 VALUATION TECHNIQUES 602
SECTION IV
CORPORATE FINANCIAL POLICIES 633
PART ONE
CAPITAL STRUCTURE POLICIES 635
33 CAPITAL STRUCTURE AND THE THEORY OF PERFECT CAPITAL MARKETS 637
34 CAPITAL STRUCTURE, TAXES AND ORGANISATION THEORIES 649
35 DEBT, EQUITY AND OPTIONS THEORY 670
36 WORKING OUT DETAILS: THE DESIGN OF THE CAPITAL STRUCTURE 689
PART TWO
EQUITY CAPITAL 721
37 RETURNING CASH TO SHAREHOLDERS 723
38 DISTRIBUTION IN PRACTICE: DIVIDENDS AND SHARE BUY-BACKS