Managerial Finance in a Canadian Setting

PrefaceIntroductionPart 1 The Institutional Environment Chapter 1 The Role of the Financial Manager and Financial Objectives of the Firm 1.1 Introduction 1.2 Role of the Financial Manager 1.3 Market Environment 1.4 Objectives of Financial Management 1.5 Limitations of the Free-Market Framework 1.6 Business Objectives as Viewed by Firms and Managers 1.7 Summary Questions and Problems Appendix: Position Description of the Chief Financial Officer for a Major Canadian Corporation Selected Bibliography Chapter 2 The Legal Setting 2.1 Introduction 2.2 Legal Forms of Business Organization 2.3 Management of the Corporation 2.4 Corporate Financing 2.5 The Holding Company 2.6 Bankruptcy and Composition 2.7 Summary Questions and Problems Selected Bibliography Chapter 3 The Tax Environment June 1987 White Paper on Tax Reform 3.1 Introduction 3.2 Taxation of Corporate Income 3.3 Business Expenses and Deductions 3.4 Taxation of Individual Incomes 3.5 Taxation of Capital Gains 3.6 Taxes and Forms of Business Organization 3.7 General 3.8 Summary Questions and Problems Selected Bibliography Chapter 4 Financial Markets 4.1 Introduction 4.2 Role of Financial Assets 4.3 Financial Intermediaries 4.4 Financial Markets 4.5 Selling of New Financial Assets 4.6 Financial Market Statistics 4.7 Summary Questions and Problems Selected Bibliography Part 2 The Valuation of Investments Chapter 5 Compounding and Discounting 5.1 Introduction 5.2 Basic Compounding and Discounting 5.3 Varying Compound Periods 5.4 Amortization of Term Loans 5.5 Summary Questions and Problems Selected Bibliography Chapter 6 The Valuation of Debt and the Determination of Interest Rates 6.1 Introduction 6.2 Valuation of Bonds 6.3 Determinants of Interest Rates 6.4 Summary Questions and Problems Selected Bibliography Chapter 7 Risk, Expected Return, and the Valuation of Stocks 7.1 Introduction 7.2 Measuring Returns on Stocks 7.3 Risk and Probabilities 7.4 Combining Risky Investments: Portfolio Risk 7.5 Risk and Expected Returns: The CAPM 7.6 Market Efficiency in the Pricing of Securities 7.7 Summary Questions and Problems Appendix: Further Topics on Portfolio 7A.1 Portfolio Theory 7A.2 The Capital Asset Pricing Model Questions and Problems Selected Bibliography Chapter 8 Capital Budgeting 8.1 Introduction 8.2 Generating Projects 8.3 Estimating Cash Flows 8.4 Discount Rate to Be Used in Investment Evaluations 8.5 Evaluation Criteria 8.6 Discounted Cash-Flow Analysis and Inflation 8.7 Interdependencies Between Projects 8.8 Project Implementation and Abandonment *Additional Selected Topics *8.9 Comparing the Net Present Value and the Internal Rate of Return *8.10 Multiple Internal Rates of Return *8.11 Benefit-Cost Ratio *8.12 Capital Rationing and Mathematical Programming 8.13 Summary Questions and Problems Selected Bibliography Chapter 9 Capital Budgeting: Further Considerations Regarding Risk 9.1 Introduction 9.2 Risk-Adjusted Discounting 9.3 Other Methods of Evaluating Risk 9.4 Other Decision-Making Aids 9.5 Portfolio Considerations *Additional Selected Topics *9.6 Certainty Equivalents *9.7 Application of Utilities 9.8 Summary Questions and Problems Selected Bibliography Part 3 Long-Term Sources of Funds Chapter 10 Long-Term Debt 10.1 Introduction 10.2 Yields and Payment Provisions 10.3 Collateral 10.4 Maturity and Repayment Provisions 10.5 The Refinancing Decision 10.6 Managing Interest-Rate Risk: Interest-Rate Futures and Swaps 10.7 Special Types of Debt 10.8 Summary Questions and Problems Selected Bibliography Chapter 11 Preferred Shares 11.1 Introduction 11.2 Yield and Payment Provisions 11.3 Maturity and Early Redemption 11.4 Refinancing 11.5 Summary Questions and Problems Selected Bibliography Chapter 12 Common Shares 12.1 Introduction 12.2 Rights of Shareholders 12.3 Features of Common Stock 12.4 Common Share Financing 12.5 Summary Questions and Problems Selected Bibliography Chapter 13 Options: Rights, and Convertibles 13.1 Introduction 13.2 General Concepts 13.3 Rights 13.4 Warrants 13.5 Convertibles 13.6 Units 13.7 Common Stocks as Call Options *Additional Selected Topic *13.8 Hedged Portfolios and Option Valuation 13.9 Summary Questions and Problems Selected Bibliography Chapter 14 The Cost of Capital 14.1 Introduction 14.2 Market Yield and Cost of Capital 14.3 Market Yields: An Historical Perspective 14.4 Cost of Debt 14.5 Cost of Preferred Shares 14.6 Cost of Common Shares 14.7 Cost of Retained Earnings 14.8 Cost of Depreciation 14.9 Weighted Average Cost of Capital 14.10 Use of the Weighted Average Cost of Capital 14.11 Cost of Convertible Securities 558 14.12 Summary Questions and Problems Selected Bibliography Part 4 Capital Structure and Dividend Policy Chapter 15 Capital Structure 15.1 Introduction 15.2 Leverage and Financial Risk 15.3 Indifference Analysis 15.4 Evaluation of Alternative Capital Structures 15.5 The Traditional Position 15.6 Practical Considerations in Determining Optimal Capital Structure 15.7 Theory of Capital Structure 15.8 Empirical Tests *Additional Selected Topic *15.9 Financial Leverage and the Capital Asset Pricing Model 15.10 Summary Questions and Problems Selected Bibliography Chapter 16 Divident Policy 16.1 Introduction 16.2 Dividend Policy: Some Conceptual Considerations 16.3 Dividend Policy in Practice 16.4 Reconciling Theory and Practice 16.5 Payment Procedures 16.6 Stock Dividends and Stock Splits 16.7 Repurchase of Stock and the Dividend Decision *Additional Selected Topics *16.8 Dividend Policy and Share Valuation: Empirical Tests *16.9 The Miller-Modigliani Irrelevance Argument *16.10 An Argument for the Relevance of Dividends Based on the Gordon Model 16.11 Summary Questions and Problems Appendix: The Role of Dividends, Earnings, and Cash Flows in the Valuation of Shares Selected BibliographyPart 5 Short- and Intermediate-Term Financing Chapter 17 Short-Term Sources of Funds 17.1 Introduction 17.2 Bank Loans 17.3 The Money Markets 17.4 International Borrowing 17.5 Factoring 17.6 Summary Questions and Problems Selected Bibliography Chapter 18 Trade Credit 18.1 Introduction 18.2 Use of Trade Credit 18.3 Types of Trade Credit 18.4 Selling Terms 18.5 Costs of Trade Credit 18.6 Management of Accounts Payable 18.7 Summary Questions and Problems Selected Bibliography Chapter 19 Intermediate-Term Sources of Funds 19.1 Introduction 19.2 Private Financial Institutions 19.3 Programs and Agencies of the Federal Government 19.4 Provincial Crown Corporations and Provincially Guaranteed Lending Programs 19.5 Project Financing 19.6 Venture Capital 19.7 Summary Questions and Problems Selected Bibliography Chapter 20 Lease Financing 20.1 Introduction 20.2 Evaluation of Financial Leases 20.3 Reasons for Leasing 20.4 Summary 796 Questions and Problems Selected BibliographyPart 6 Financial Analysis, Planning, and Control Chapter 21 Financial Statement Analysis 21.1 Introduction 21.2 Ratio Analysis 21.3 Common-Size Analysis 21.4 Effects of Changing Prices on Financial Statement Analysis 21.5 International Considerations 21.6 Summary Questions and Problems Selected Bibliography Chapter 22 Funds-Flow Analysis and Financial Forescasting 22.1 Introduction 22.2 Statements of Changes in Financial Position 22.3 Pro Forma Financial Statements 22.4 Summary Questions and Problems Selected Bibliography Part 7 Working-Capital Management Chapter 23 The Management of Cash and Marketable Securities 23.1 Introduction 23.2 Motives for Holding Cash 23.3 Flow of Funds 23.4 Cash Budgeting 23.5 Managing Cash Flows 23.6 Optimal Cash Balances and Investments in Marketable Securities 23.7 Summary Questions and Problems Selected Bibliography Chapter 24 The Management of Accounts Receivable 24.1 Introduction 24.2 Credit Analysis of Individual Accounts 24.3 Credit Policies 24.4 Credit Insurance 24.5 Use of Credit Cards in Retailing 24.6 Captive Finance Companies 24.7 Summary Questions and Problems Selected Bibliography Chapter 25 Inventory Management 25.1 Introduction 25.2 General Considerations 25.3 Basic Inventory Models 25.4 Impact of Price-Level Changes on Inventory 25.5 Summary Questions and Problems Selected Bibliography Chapter 26 Concept of Working-Capital Management 26.1 Introduction 26.2 Characteristics of Working Capital 26.3 Investment in Current Assets 26.4 Use of Short-Term Liabilities 26.5 Working-Capital Management in an International Environment 26.6 Summary Questions and Problems Selected BibliographyPart 8 External Expansion Chapter 27 Mergers and Consolidations 27.1 Introduction 27.2 Motives for Business Combinations 27.3 Discounted Cash-Flow Analysis 27.4 Accounting for Business Combinations 27.5 Effects of Mergers on Earnings per Share 27.6 Procedures 27.7 Public Policy Implications of Business Combinations 27.8 Summary Questions and Problems Selected BibliographyAppendix Compounding and Discounting Tables (These are Indicated by a Colored Strip on the Outer edge of the Book near the Back Cover.)GlossaryIndex