Fundamentals of Financial Management 14th edition by Brigham, Houston ISBN 1285867971 978-1285867977

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ISBN 10: 1285867971 
ISBN 13:  978-1285867977
Author: Brigham, Houston

Thoroughly updated to reflect the latest trends, developments, and practices from the field, FUNDAMENTALS OF FINANCIAL MANAGEMENT, 14e equips you with a focused understanding of today’s corporate finance and financial management. This market-leading text offers a unique balance of clear concepts, contemporary theory, and practical applications in order to help you understand the concepts and reasons behind corporate budgeting, financing, working capital decision making, forecasting, valuation, and Time Value of Money (TVM). Offering the most cutting-edge coverage available, the Fourteenth Edition includes discussions of the federal debt, the ongoing recovery of financial markets, and the European debt crisis. Numerous practical examples, “Quick Questions”, problem-solving tutorials, and Integrated Cases help you put theory into action. In addition, Excel Spreadsheet Models help you master this critical software tool.

Fundamentals of Financial Management 14th Table of contents:

Part 1. Introduction to Financial Management

Chapter 1. An Overview of Financial Management

1-1. What Is Finance?

1-1a. Areas of Finance

1-1b. Finance Within an Organization

1-1c. Finance versus Economics and Accounting

1-2. Jobs in Finance

1-3. Forms of Business Organization

1-4. The Main Financial Goal: Creating Value for Investors

1-4a. Determinants of Value

1-4b. Intrinsic Value

1-4c. Consequences of Having a Short-Run Focus

1-5. Stockholder–Manager Conflicts

1-5a. Compensation Packages

1-5b. Direct Stockholder Intervention

1-5c. Managers’ Response

1-6. Stockholder–Debtholder Conflicts

1-7. Balancing Shareholder Interests and the Interests of Society

1-8. Business Ethics

1-8a. What Companies Are Doing?

1-8b. Consequences of Unethical Behavior

1-8c. How Should Employees Deal with Unethical Behavior?

Tying It All Together

Self-Test Questions

Questions

Chapter 2. Financial Markets and Institutions

2-1. The Capital Allocation Process

2-2. Financial Markets

2-2a. Types of Markets

2-2b. Recent Trends

2-3. Financial Institutions

2-4. The Stock Market

2-4a. Physical Location Stock Exchanges

2-4b. Over-the-Counter (OTC) and the NASDAQ Stock Markets

2-5. The Market for Common Stock

2-5a. Types of Stock Market Transactions

2-6. Stock Markets and Returns

2-6a. Stock Market Reporting

2-6b. Stock Market Returns

2-7. Stock Market Efficiency

2-7a. Behavioral Finance Theory

2-7b. Conclusions about Market Efficiency

Tying It All Together

Self-Test Questions

Questions

Integrated Case. Smyth Barry & Company

Part 2. Fundamental Concepts in Financial Management

Chapter 3. Financial Statements, Cash Flow, and Taxes

3-1. Financial Statements and Reports

3-2. The Balance Sheet

3-2a. Allied’s Balance Sheet

3-3. The Income Statement

3-4. Statement of Cash Flows

3-5. Statement of Stockholders’ Equity

3-6. Uses and Limitations of Financial Statements

3-7. Free Cash Flow

3-8. MVA and EVA

3-9. Income Taxes

3-9a. Individual Taxes

3-9b. Corporate Taxes

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. D’Leon Inc., Part I

Chapter 4. Analysis of Financial Statements

4-1. Ratio Analysis

4-2. Liquidity Ratios

4-2a. Current Ratio

4-2b. Quick, or Acid Test, Ratio

4-3. Asset Management Ratios

4-3a. Inventory Turnover Ratio

4-3b. Days Sales Outstanding

4-3c. Fixed Assets Turnover Ratio

4-3d. Total Assets Turnover Ratio

4-4. Debt Management Ratios

4-4a. Total Debt to Total Capital

4-4b. Times-Interest-Earned Ratio

4-5. Profitability Ratios

4-5a. Operating Margin

4-5b. Profit Margin

4-5c. Return on Total Assets

4-5d. Return on Common Equity

4-5e. Return on Invested Capital

4-5f. Basic Earning Power (BEP) Ratio

4-6. Market Value Ratios

4-6a. Price/Earnings Ratio

4-6b. Market/Book Ratio

4-7. Tying the Ratios Together: The DuPont Equation

4-8. Potential Misuses of ROE

4-9. Using Financial Ratios to Assess Performance

4-9a. Comparison to Industry Average

4-9b. Benchmarking

4-9c. Trend Analysis

4-10. Uses and Limitations of Ratios

4-11. Looking Beyond the Numbers

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. D’Leon Inc., Part II

Chapter 5. Time Value of Money

5-1. Time Lines

5-2. Future Values

5-2a. Step-by-Step Approach

5-2b. Formula Approach

5-2c. Financial Calculators

5-2d. Spreadsheets

5-2e. Graphic View of the Compounding Process

5-3. Present Values

5-3a. Graphic View of the Discounting Process

5-4. Finding the Interest Rate, I

5-5. Finding the Number of Years, N

5-6. Annuities

5-7. Future Value of an Ordinary Annuity

5-8. Future Value of an Annuity Due

5-9. Present Value of an Ordinary Annuity

5-10. Finding Annuity Payments, Periods, and Interest Rates

5-10a. Finding Annuity Payments, Pmt

5-10b. Finding the Number of Periods, N

5-10c. Finding the Interest Rate, I

5-11. Perpetuities

5-12. Uneven Cash Flows

5-13. Future Value of an Uneven Cash Flow Stream

5-14. Solving for I with Uneven Cash Flows

5-15. Semiannual and Other Compounding Periods

5-16. Comparing Interest Rates

5-17. Fractional Time Periods

5-18. Amortized Loans

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. First National Bank

Part 3. Financial Assets

Chapter 6. Interest Rates

6-1. The Cost of Money

6-2. Interest Rate Levels

6-3. The Determinants of Market Interest Rates

6-3a. The Real Risk-Free Rate of Interest, r*

6-3b. The Nominal, or Quoted, Risk-Free Rate of Interest, r RF = r ⁢ * + IP

6-3c. Inflation Premium (IP)

6-3d. Default Risk Premium (DRP)

6-3e. Liquidity Premium (LP)

6-3f. Interest Rate Risk and the Maturity Risk Premium (MRP)

6-4. The Term Structure of Interest Rates

6-5. What Determines the Shape of the Yield Curve?

6-6. Using the Yield Curve to Estimate Future Interest Rates

6-7. Macroeconomic Factors That Influence Interest Rate Levels

6-7a. Federal Reserve Policy

6-7b. Federal Budget Deficits or Surpluses

6-7c. International Factors

6-7d. Business Activity

6-8. Interest Rates and Business Decisions

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Morton Handley & Company

Chapter 7. Bonds and Their Valuation

7-1. Who Issues Bonds?

7-2. Key Characteristics of Bonds

7-2a. Par Value

7-2b. Coupon Interest Rate

7-2c. Maturity Date

7-2d. Call Provisions

7-2e. Sinking Funds

7-2f. Other Features

7-3. Bond Valuation

7-4. Bond Yields

7-4a. Yield to Maturity

7-4b. Yield to Call

7-5. Changes in Bond Values Over Time

7-6. Bonds with Semiannual Coupons

7-7. Assessing a Bond’s Riskiness

7-7a. Price Risk

7-7b. Reinvestment Risk

7-7c. Comparing Price Risk and Reinvestment Risk

7-8. Default Risk

7-8a. Various Types of Corporate Bonds

7-8b. Bond Ratings

7-8c. Bankruptcy and Reorganization

7-9. Bond Markets

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Western Money Management Inc.

Chapter 8. Risk and Rates of Return

8-1. The Risk-Return Trade-Off

8-2. Stand-Alone Risk

8-2a. Statistical Measures of Stand-Alone Risk

8-2b. Measuring Stand-Alone Risk: The Standard Deviation

8-2c. Using Historical Data to Measure Risk

8-2d. Measuring Stand-Alone Risk: The Coefficient of Variation

8-2e. Risk Aversion and Required Returns

8-3. Risk in a Portfolio Context: The CAPM

8-3a. Expected Portfolio Returns, r ^ p

8-3b. Portfolio Risk

8-3c. Risk in a Portfolio Context: The Beta Coefficient

8-4. The Relationship Between Risk and Rates of Return

8-4a. The Impact of Expected Inflation

8-4b. Changes in Risk Aversion

8-4c. Changes in a Stock’s Beta Coefficient

8-5. Some Concerns About Beta and the CAPM

8-6. Some Concluding Thoughts: Implications for Corporate Managers and Investors

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Merrill Finch Inc.

Chapter 9. Stocks and Their Valuation

9-1. Legal Rights and Privileges of Common Stockholders

9-1a. Control of the Firm

9-1b. The Preemptive Right

9-2. Types of Common Stock

9-3. Stock Price Versus Intrinsic Value

9-3a. Why Do Investors and Companies Care About Intrinsic Value?

9-4. The Discounted Dividend Model

9-4a. Expected Dividends as the Basis for Stock Values

9-5. Constant Growth Stocks

9-5a. Illustration of a Constant Growth Stock

9-5b. Dividends Versus Growth

9-5c. Which Is Better: Current Dividends or Growth?

9-5d. Required Conditions for the Constant Growth Model

9-6. Valuing Nonconstant Growth Stocks

9-7. Enterprise-Based Approach to Valuation

9-7a. The Corporate Valuation Model

9-7b. Comparing the Corporate Valuation and Discounted Dividend Models

9-8. Preferred Stock

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Mutual of Chicago Insurance Company

Appendix 9A. Stock Market Equilibrium

Part 4. Investing in Long-Term Assets: Capital Budgeting

Chapter 10. The Cost of Capital

10-1. An Overview of the Weighted Average Cost of Capital (WACC)

10-2. Basic Definitions

10-3. Cost of Debt, r d ( 1 – T )

10-4. Cost of Preferred Stock, r p

10-5. The Cost of Retained Earnings, r s

10-5a. The CAPM Approach

10-5b. Bond-Yield-Plus-Risk-Premium Approach

10-5c. Dividend-Yield-Plus-Growth-Rate, or Discounted Cash Flow (DCF), Approach

10-5d. Averaging the Alternative Estimates

10-6. Cost of New Common Stock, r e

10-6a. Add Flotation Costs to a Project’s Cost

10-6b. Increase the Cost of Capital

10-6c. When Must External Equity Be Used?

10-7. Composite, or Weighted Average, Cost of Capital, WACC

10-8. Factors That Affect the WACC

10-8a. Factors the Firm Cannot Control

10-8b. Factors the Firm Can Control

10-9. Adjusting the Cost of Capital for Risk

10-10. Some Other Problems with Cost of Capital Estimates

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Coleman Technologies Inc.

Chapter 11. The Basics of Capital Budgeting

11-1. An Overview of Capital Budgeting

11-2. Net Present Value (NPV)

11-3. Internal Rate of Return (IRR)

11-4. Multiple Internal Rates of Return

11-5. Reinvestment Rate Assumptions

11-6. Modified Internal Rate of Return (MIRR)

11-7. NPV Profiles

11-8. Payback Period

11-9. Conclusions on Capital Budgeting Methods

11-10. Decision Criteria Used in Practice

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Allied Components Company

Chapter 12. Cash Flow Estimation and Risk Analysis

12-1. Conceptual Issues in Cash Flow Estimation

12-1a. Free Cash Flow versus Accounting Income

12-1b. Timing of Cash Flows

12-1c. Incremental Cash Flows

12-1d. Replacement Projects

12-1e. Sunk Costs

12-1f. Opportunity Costs Associated with Assets the Firm Owns

12-1g. Externalities

12-2. Analysis of an Expansion Project

12-2a. Effect of Different Depreciation Rates

12-2b. Cannibalization

12-2c. Opportunity Costs

12-2d. Sunk Costs

12-2e. Other Changes to the Inputs

12-3. Replacement Analysis

12-4. Risk Analysis in Capital Budgeting

12-5. Measuring Stand-Alone Risk

12-5a. Sensitivity Analysis

12-5b. Scenario Analysis

12-5c. Monte Carlo Simulation

12-6. Within-Firm and Beta Risk

12-7. Unequal Project Lives

12-7a. Replacement Chains

12-7b. Equivalent Annual Annuities (EAA)

12-7c. Conclusions About Unequal Lives

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Allied Food Products

Appendix 12A. Tax Depreciation

Chapter 13. Real Options and Other Topics in Capital Budgeting

13-1. Introduction to Real Options

13-2. Growth (Expansion) Options

13-3. Abandonment/Shutdown Options

13-4. Investment Timing Options

13-5. Flexibility Options

13-6. The Optimal Capital Budget

13-7. The Post-Audit

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problems

Integrated Case. 21st Century Education Products

Part 5. Capital Structure and Dividend Policy

Chapter 14. Capital Structure and Leverage

14-1. Book, Market, or “Target” Weights?

14-1a. Measuring the Capital Structure

14-1b. Capital Structure Changes Over Time

14-2. Business and Financial Risk

14-2a. Business Risk

14-2b. Factors that Affect Business Risk

14-2c. Operating Leverage

14-2d. Financial Risk

14-3. Determining the Optimal Capital Structure

14-3a. WACC and Capital Structure Changes

14-3b. The Hamada Equation

14-3c. The Optimal Capital Structure

14-4. Capital Structure Theory

14-4a. The Effect of Taxes

14-4b. The Effect of Potential Bankruptcy

14-4c. Trade-Off Theory

14-4d. Signaling Theory

14-4e. Using Debt Financing to Constrain Managers

14-4f. Pecking Order Hypothesis

14-4g. Windows of Opportunity

14-5. Checklist for Capital Structure Decisions

14-6. Variations in Capital Structures

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Campus Deli Inc.

Chapter 15. Distributions to Shareholders: Dividends and Share Repurchases

15-1. Dividends Versus Capital Gains: What Do Investors Prefer?

15-1a. Dividend Irrelevance Theory

15-1b. Reasons Some Investors Prefer Dividends

15-1c. Reasons Some Investors Prefer Capital Gains

15-2. Other Dividend Policy Issues

15-2a. Information Content, or Signaling, Hypothesis

15-2b. Clientele Effect

15-3. Establishing the Dividend Policy in Practice

15-3a. Setting the Target Payout Ratio: The Residual Dividend Model

15-3b. Earnings, Cash Flows, and Dividends

15-3c. Payment Procedures

15-4. Dividend Reinvestment Plans

15-5. Summary of Factors Influencing Dividend Policy

15-5a. Constraints

15-5b. Investment Opportunities

15-5c. Alternative Sources of Capital

15-5d. Effects of Dividend Policy on r s

15-6. Stock Dividends and Stock Splits

15-6a. Stock Splits

15-6b. Stock Dividends

15-6c. Effect on Stock Prices

15-7. Stock Repurchases

15-7a. The Effects of Stock Repurchases

15-7b. Advantages of Repurchases

15-7c. Disadvantages of Repurchases

15-7d. Conclusions on Stock Repurchases

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Southeastern Steel Company

Part 6. Working Capital Management and Forecasting

Chapter 16. Working Capital Management

16-1. Background on Working Capital

16-2. Current Assets Investment Policies

16-3. Current Assets Financing Policies

16-3a. Maturity Matching, or “Self-Liquidating,” Approach

16-3b. Aggressive Approach

16-3c. Conservative Approach

16-3d. Choosing Between the Approaches

16-4. The Cash Conversion Cycle

16-4a. Calculating the Targeted CCC

16-4b. Calculating the CCC from Financial Statements

16-5. The Cash Budget

16-6. Cash and Marketable Securities

16-6a. Currency

16-6b. Demand Deposits

16-6c. Marketable Securities

16-7. Inventories

16-8. Accounts Receivable

16-8a. Credit Policy

16-8b. Setting and Implementing the Credit Policy

16-8c. Monitoring Accounts Receivable

16-9. Accounts Payable (Trade Credit)

16-10. Bank Loans

16-10a. Promissory Note

16-10b. Line of Credit

16-10c. Revolving Credit Agreement

16-10d. Costs of Bank Loans

16-11. Commercial Paper

16-12. Accruals (Accrued Liabilities)

16-13. Use of Security in Short-Term Financing

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Ski Equipment Inc.

Chapter 17. Financial Planning and Forecasting

17-1. Strategic Planning

17-2. The Sales Forecast

17-3. The AFN Equation

17-3a. Excess Capacity Adjustments

17-4. Forecasted Financial Statements

17-4a. Part I. Inputs

17-4b. Part II. Forecasted Income Statement

17-4c. Part III. Forecasted Balance Sheet

17-4d. Part IV. Ratios and EPS

17-4e. Using the Forecast to Improve Operations

17-5. Using Regression to Improve Forecasts

17-6. Analyzing the Effects of Changing Ratios

17-6a. Modifying Accounts Receivable

17-6b. Modifying Inventories

17-6c. Other “Special Studies”

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. New World Chemicals Inc.

Part 7. Special Topics in Financial Management

Chapter 18. Derivatives and Risk Management

18-1. Reasons To Manage Risk

18-2. Background on Derivatives

18-3. Options

18-3a. Option Types and Markets

18-3b. Factors That Affect the Value of a Call Option

18-3c. Exercise Value Versus Option Price

18-4. Introduction To Option Pricing Models

18-5. The Black-Scholes Option Pricing Model (OPM)

18-5a. OPM Assumptions and Equations

18-5b. OPM Illustration

18-6. Forward and Futures Contracts

18-7. Other Types Of Derivatives

18-7a. Swaps

18-7b. Structured Notes

18-7c. Inverse Floaters

18-8. Using Derivatives To Reduce Risks

18-8a. Security Price Exposure

18-8b. Futures

18-8c. Swaps

18-8d. Commodity Price Exposure

18-8e. The Use and Misuse of Derivatives

18-9. Risk Management

18-9a. An Approach to Risk Management

Tying It All together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Tropical Sweets Inc.

Appendix 18A. Valuation of Put Options

Questions

Problems

Chapter 19. Multinational Financial Management

19-1. Multinational, or Global, Corporations

19-2. Multinational Versus Domestic Financial Management

19-3. The International Monetary System

19-3a. International Monetary Terminology

19-3b. Current Monetary Arrangements

19-4. Foreign Exchange Rate Quotations

19-4a. Cross Rates

19-4b. Interbank Foreign Currency Quotations

19-5. Trading in Foreign Exchange

19-5a. Spot Rates and Forward Rates

19-6. Interest Rate Parity

19-7. Purchasing Power Parity

19-8. Inflation, Interest Rates, and Exchange Rates

19-9. International Money and Capital Markets

19-9a. International Credit Markets

19-9b. International Stock Markets

19-10. Investing Overseas

19-11. International Capital Budgeting

19-12. International Capital Structures

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Citrus Products Inc.

Chapter 20. Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles

20-1. Preferred Stock

20-1a. Basic Features

20-1b. Adjustable-Rate Preferred Stock

20-1c. Advantages and Disadvantages of Preferred Stock

20-2. Leasing

20-2a. Types of Leases

20-2b. Financial Statement Effects

20-2c. Evaluation by the Lessee

20-2d. Other Factors That Affect Leasing Decisions

20-3. Warrants

20-3a. Initial Market Price of a Bond with Warrants

20-3b. Use of Warrants in Financing

20-3c. The Component Cost of Bonds with Warrants

20-3d. Problems with Warrant Issues

20-4. Convertibles

20-4a. Conversion Ratio and Conversion Price

20-4b. The Component Cost of Convertibles

20-4c. Use of Convertibles in Financing

20-4d. Convertibles Can Reduce Agency Costs

20-5. A Final Comparison of Warrants and Convertibles

20-6. Reporting Earnings When Warrants or Convertibles Are Outstanding

Tying It All Together

Self-Test Questions

Questions

Problems

Comprehensive/Spreadsheet Problem

Integrated Case. Fish & Chips Inc., Part I

Fish & Chips Inc., Part II

Chapter 21. Mergers and Acquisitions

21-1. Rationale For Mergers

21-1a. Synergy

21-1b. Tax Considerations

21-1c. Purchase of Assets Below Their Replacement Cost

21-1d. Diversification

21-1e. Managers’ Personal Incentives

21-1f. Breakup Value

21-2. Types of Mergers

21-3. Level of Merger Activity

21-4. Hostile Versus Friendly Takeovers

21-5. Merger Analysis

21-5a. Valuing the Target Firm

21-5b. Setting the Bid Price

21-5c. Post-Merger Control

21-6. The Role of Investment Bankers

21-6a. Arranging Mergers

21-6b. Developing Defensive Tactics

21-6c. Establishing a Fair Value

21-6d. Financing Mergers

21-6e. Arbitrage Operations

21-7. Do Mergers Create Value? The Empirical Evidence

21-8. Corporate Alliances

21-9. Private Equity Investments

21-10. Divestitures

21-10a. Types of Divestitures

21-10b. Divestiture Illustrations

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