Fundamentals of Financial Management - MIM

1 Fundamentals ofFinancial ManagementJames C. Van HorneJohn M. Wachowicz, EditionDo you want to understand how fi nancial decisions impact the value of a company? If you are new to fi nancial Management or studying for a professional qualifi cation, this user-friendly textbook makes the challenges facing today s rapidly changing business world easier to understand. Now in its 13th edition, Fundamentals of Financial Management maintains its dedication to the fi nancial decision-making process and the analysis of value creation, but develops a more international scope and introduces new topics into the debate. Current discussions on corporate governance, ethical dilemmas, globalization of fi nance, strategic alliances and the growth of outsourcing have been added with examples and boxed features to aid understanding and provide a more global perspective of fi nancial Management .

2 What s New?Chapter 1 - Expanded coverage of Corporate Social Responsibility including the concept of 6 The discussion of fi nancial statement analysis includes the push for convergence of accounting standards around the 9 Cash and marketable securities Management material expanded and 24 - The updated chapter on International Financial Management includes discussion of Islamic sukuk bonds. an imprint cover image: Getty Images The book provides the reader with information about the current hot-topics in fi nance and has a clear emphasis on the basic principles of fi nancial Management without repetition. Furthermore, as simple language is used, the book can be easily understood by students that are not native speakers of English.

3 Axel-Adam M ller, Lancaster This is the best book I have found so far. Jean Bellemans, Free University of BrusselsAuthors: James C. Van Horne, Professor of Banking and Finance at Stanford University is also the author of Financial Management and Policy, a Pearson Education text. John M. Wachowicz, Jr., Professor of Finance at The University of Tennessee..a useful text either as preparation for a second year course, or as a text for a fi rst year fi nancial Management course that provides a fi rst sweep of the major fi nancial Management topics. Not many texts cover this ground well. Brian Wright, ExeterIdeal for introductory courses in fi nancial Management , for a professional qualifi cation and as a reference for practitioners.

4 On the reading list for Association of Chartered Certifi ed Accountants (ACCA) Qualifi cation Paper (F9) Financial Management . Suggested reading for Certifi ed Management Accountant (CMA) into over ten languages and received fi rst place among business academic texts in Pearson s top 50 best seller s translation list. Visit to access free student resources including: Self-test multiple-choice, true/false and essay to author s award-winning website for even more online testing material, along with exercises and regularly updated links to additional support material. Online glossary to explain key terms. Excel templates for spread-sheet approach to end-of-chapter problem for this edition!

5 Link to PowerPoint slides on key chapters and learn how to use Excel to solve problems. Fundamentals of Financial Management13thEditionVan 123/9/08 10:35:34 Fundamentals of Financial ManagementVisit the Van Horne and Wachowicz: Fundamentals of Financial Managementthirteenth editionCompanion Website at find valuable studentlearning material including:lLearning objectives for each chapterlMultiple choice, true/false and essay questions to test your understanding lPowerPoint presentations for each chapter to remind you of key concepts lAn online glossary to explain key terms and flash cards to test your knowledge of key terms and definitions in each chapter lExcel templates for end of chapter problems to help you model a spread sheetapproach to solving the problemlLink to author s own award-winning website with even more multiple choice andtrue/false questions, as well as web-based exercises and regularly updated linksto additional support material lNew to this edition.

6 PowerPoint presentations for key chapters integrating anddemonstrating how Excel can be used to solve 9/19/08 13:56 Page i We work with leading authors to develop thestrongest educational materials in business andfinance, bringing cutting-edge thinking and bestlearning practice to a global a range of well-known imprints, includingFinancial Times Prentice Hall, we craft high qualityprint and electronic publications which help readersto understand and apply their content, whetherstudying or at find out more about the complete range of ourpublishing, please visit us on the World Wide Web 9/19/08 13:56 Page ii Fundamentals ofFinancial Managementthirteenth editionJames C.

7 Van HorneStanford UniversityJohn M. Wachowicz, University of 9/19/08 13:56 Page iii Pearson Education LimitedEdinburgh GateHarlowEssex CM20 2 JEEnglandand Associated Companies throughout the worldVisit us on the World Wide Web editions published under the Prentice Hall imprintThirteenth edition published 2008 Pearson Education Limited 2009, 2005 2001, 1998 by Prentice-Hall, rights of James C. Van Horne and John M. Wachowicz, Jr. to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6 10 Kirby Street, London EC1N trademarks used herein are the property of their respective owners.

8 The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such : 978-0-273-71363-0 British Library Cataloguing-in-Publication DataA catalogue record for this book is available from the British LibraryLibrary of Congress Cataloguing-in-Publication DataVan Horne, James of Financial Management / James C. Van Horne, John M. Wachowicz. 13th bibliographical references and 978-0-273-71363-0 (pbk. : alk. paper)1. Corporations Businessenterprises Wachowicz, John dc22200802736510987654312111009 Typeset in 10/12pt Minion by 35 Printed and bound by Ashford Colour Press Ltd.

9 , GosportThe publisher s policy is to use paper manufactured from sustainable 4/18/09 10:23 AM Page iv To Mimi, Drew, Stuart, and StephenJames C. Van HorneTo Emerson, John, June, Lien, and PatriciaJohn M. Wachowicz, 9/19/08 13:56 Page v 9/19/08 13:56 Page vi viiBrief ContentslllPart1 Introduction to Financial Management1 The Role of Financial Management 12 The Business, Tax and Financial Environments 17lllPart2 Valuation3 The Time value of Money 414 The Valuation of Long-Term Securities 735 Risk and Return 97 Appendix AMeasuring Portfolio Risk 117 Appendix BArbitrage Pricing Theory 119lllPart3 Tools of Financial Analysis and Planning6 Financial Statement Analysis 127 AppendixDeferred Taxes and Financial Analysis 1587 Funds Analysis, Cash-Flow Analysis.

10 And Financial Planning 169 AppendixSustainable Growth Modeling 190lllPart4 Working Capital Management8 Overview of Working Capital Management 2059 Cash and Marketable Securities Management 22110 Accounts Receivable and Inventory Management 24911 Short-Term Financing 281lllPart5 Investment in Capital Assets12 Capital Budgeting and Estimating Cash Flows 30713 Capital Budgeting Techniques 323 Appendix AMultiple Internal Rates of Return 341 Appendix BReplacement Chain Analysis 34314 Risk and Managerial (Real) Options in Capital Budgeting 9/19/08 13:56 Page vii lllPart6 The Cost of Capital, Capital Structure, and Dividend Policy15 Required Returns and the Cost of Capital 381 Appendix AAdjusting the Beta for Financial Leverage 407 Appendix BAdjusted Present value 40816 Operating and Financial Leverage 41917 Capital Structure Determination 45118 Dividend Policy 475lllPart7 Intermediate and Long-Term Financing19 The Capital Market 50520 Long-Term Debt, Preferred Stock, and Common Stock 527 AppendixRefunding a Bond Issue 54421 Term Loans and Leases 553 AppendixAccounting Treatment of Leases 567lllPart8 Special Areas of Financial Management22 Convertibles, Exchangeables.