FINANCIAL MANAGEMENT THEORY AND PRACTICE
- CENGAGE LEARNING
978-0071078405
Financial Management: An Overview Forms of Business Organisation Financial Decisions in a Firm Goal of Financial Management 1 The Fundamental Principle of Finance Building Blocks of Modern Finance Risk-Return Tradeoff ' Agency Problem '-Business Ethics and Social Responsibility Organisation of the Finance Function 16 Relationship of Finance to Economics and Accounting Emerging Role of the Financial Manager in India . Outline of the Book ' The Financial System e Functions of the Financial System ! Financial Assets • Financial Markets Financial Market Return. Financial Intermediaries Regulatory Infrastructure Growth and Trends in the Indian Financial System : Financial Analysis and Planning . Financial Statements, Taxes, and Cash Flow Balance Sheet Profit and Loss Account Profit versus Cash Flow Statement of Cash Flow Consolidated Financial Statements Other Items in the Annual Report Manipulation of the Bottom Line Modifying Accounting Data for Managerial Decisions Analysis of Financial Statements Financial Ratios DuPont Analysis ' Standardised Financial Statements Applications of Financial Analysis Using Financial Statement Analysis Going Beyond the Numbers. . Financial Planning and Forecasting What and Why of Financial Planning Sales Forecast Pro Forma Profit and Loss Account Pro Forma Balance Sheet Financial Modeling Using Spreadsheet Growth and External Financing Requirement Key Growth Rates , , Fundamental Valuation Concepts The Time Value of Money 1 Time Lines and Notation Future Value of a Single Amount Present Value of a Single Amount Future Value of an Annuity Present Value of an Annuity Present Value of a Perpetuity 1_ Intra-Year Compounding and Discounting. Risk and Return Historical Returns and Risk Expected Return and Risk of a Single Asset Risk and Return of a Portfolio Measurement of Market Risk Determinants of Beta T Relationship Between Risk and Return .. Risk and Return: Portfolio Theory and Asset Pricing Models Portfolio Risk - Efficient Frontier and Optimal Portfolio Capital Asset Pricing Model - Arbitrage Pricing Theory and Multifactor Models . Options and Their Valuation How Options Work Options and Their Payoffs Just Before Expiration Factors Determining Option Values Binomial Model For Option Valuation Black and Scholes Model. Capital Budgeting . Techniques of Capital Budgeting Capital Budgeting Process Project Classification - Investment Criteria . Net Present Value - Benefit-Cost Ratio . Internal Rate of Return Modified Internal Rate of Returns (MIRR) Payback Period Accounting Rate of Return I . Investment Appraisal in Practice . Estimation of Project Cash Flows Elements of the Cash Flow Stream Basic Principles of Cash Flow Estimation Cash Flow Illustrations Cash Flows for a Replacement Project Biases in Cash Flow Estimation . Risk Analysis in Capital Budgeting. Scenario Analysis Break-Even Analysis Hillier Model ' Simulation Analysis Decision Tree Analysis . Corporate Risk Analysis - Managing Risk . Project Selection Under Risk Risk Analysis in Practice . The Cost of Capital Some Preliminaries _ Cost of Debt and Preference Cost of Equity Determining the Proportions Weighted Average Cost of Capital Weighted Marginal Cost of Capital .. L Determining the Optimal Capital Budget Divisional and Project Cost of Capital Floatation Cost and the Cost of Capital '. Factors Affecting the Weighed Average Cost of Capital Misconceptions Surrounding Cost of Capital Capital Budgeting: Extensions ' Choice between Projects of Unequal Life . Inter-relationship between Investment and Financing Aspects Capital Budgeting Under Constraints 3. Value of Options . Sources of Positive NPV. Qualitative Influences . Capital Structure and Dividend Decisions ►. Capital Structure and Firm Value Assumptions and Definitions Net Income Approach Net Operating Income Approach Traditional Position Modigliani and Miller Position Taxation and Capital Sructure Tradeoff Theory Signaling Theory Capital Structure Decision PBIT — EPS Analysis . ROI — ROE Analysis Leverage Analysis Ratio Analysis Cash Flow Analysis Comparative Analysis Guidelines for Capital Sructure Planning Checklist for the Capital Structure Decision Well-Crafted Financing Strategy: The Case of Reliance Industries Limited. Contents . Dividend Policy and Firm Value Nlodels in Which Investment and Dividend Decisions are Relate Traditional Position Miller and Nlodigliani Position Radical Position Overall Picture . Dividend Decision Firms Pay Dividends Dimensions of Dividend Policy Diviciend Policy Formulation .-rate Dividend Behaviour and Procedural Aspects , Working Capital Management Cash and Liquidity Management Cash Budgeting _ Long Term Cash Forecasting E. Reports for Control Cash Collection and Disbursement Optimal Cash Balance Investment of Surplus Funds Cash Management Models , ' . Credit Management Terms of Payment Credit Policy Variables Credit Evaluation Credit Granting Decision Control of Accounts Receivables Credit Management in India — Inventory Management Need for Inventories Order Quantity—EOQ Model Order Point . Pricing of Raw Materials and Valuation of Stocks Monitoring and Control of Inventories • Criteria for Judging the Inventory System Inventory Management in India. Working Capital Financing Accruals Trade Credit _ Working Capital Advance by Commercial Banks Regulation of Bank Finance Public Deposits Inter-Corporate Deposits Short-Term Loans from Financial Institutions Rights Debentures for Working Capital — Commercial Paper . Working Capital Management: Extensions Cash Budget Simulation Discriminant Analysis and Customer Classification Advances in Inventory Management Working Captial Leverage . Innovations in Debt Securities 2 Securitisation . Bond Covenants Bond Refunding Duration Term Structure of Interest Rates Leasing, Hire-Purchase, and Project Finance Types of Leases Rationale for Leasing Mechanics of Leasing . Operating Leases Leasing as a Financing Decision Hire-Purchase Arrangement Choice Between Leasing and Hire-Purchase Project Finance -- - Hybrid Financing Preference Capital Features of Warrants and Convertible Debentures Valuation of Warrants Valuation of Compulsorily Convertible (Partly or Fully) Debentures Valuation of Optionally Convertible Debentures -Motives for Issuing Warrants and Convertible Debentures Innovative Hybrids , Corporate Valuation • A4isted Book Value Approach Stock and Debt Approach -Direct Comparison Approach Discounted Cash Flow Approach Analysing Historical Performance Estimating the Cost of Capital Forecasting Performance Determining the Continuing Value Calculating the Firm Value and Interpreting the Results DCF Approach: -Stage and Stage Growth Modelc Free Cash Flow to Equity (FCFE) Valuation Guidelines for Corporate Valuation c Value Based Management Methods and Key Premises of VBM Alcar Approach stern Stewart Approach (EVA® Approach) BCC; Approach " Lessons from the Experiences of VBM .Adopters