Finance for executives : managing for value creation / Gabriel Hawawini, Claude Viallet.

Format:

Book

Author/Creator:

Hawawini, Gabriel A.

Contributor:

Viallet, Claude.

Class of 1932 Fund.

Language:

English

Subjects (All):

Corporations--Finance.

Corporations.

Business enterprises--Finance.

Business enterprises.

Managerial accounting.

Chief financial officers.

Physical Description:

xvii, 606 pages : illustrations ; 24 cm

Edition:

Second edition.

Place of Publication:

Australia ; Cincinnati, Ohio : South-Western/Thomson Learning, [2002]

Summary:

A concise yet thorough, analytically sound 14-chapter introduction to financial management designed especially for the experienced executive. Where most texts prove to be either too simplistic or too advanced for most non-financial managers, this book employs the appropriate level of both practicality and rigor for the executive audience. Its practical approach make it ideal for a course taught from a case approach or as a complement to a more technical introductory text. Self-contained chapters make it an excellent and concise reference text and useful for readers who want to learn the concepts on their own outside of the traditional classroom.

Contents:

Chapter 1 Financial Management and Value Creation: an Overview 1

The Key Question: Will Your Decision Create Value? 2

The Fundamental Finance Principle 5

Applying the Fundamental Finance Principle 9

The Role of Financial Markets 14

The Business Cycle 18

HLC's Financial Statements 20

How Profitable is a Firm? 25

How Much Cash Does a Firm Generate? 26

How Risky is a Firm? 28

Is Value Created? 30

Chapter 2 Understanding Balance Sheets and Income Statements 37

Financial Accounting Statements 37

The Balance Sheet 40

The Income Statement 50

Reconciling Balance Sheets and Income Statements 54

The Structure of the Owners' Equity Account 56

Appendix 2.1 Specimen Financial Statements 60

Polo Ralph Lauren's Balance Sheets and Income Statements 60

Part II Financial Diagnosis and Management

Chapter 3 Assessing Liquidity and Operational Efficiency 67

The Managerial Balance Sheet 68

The Components of Capital Employed 75

The Matching Strategy 77

A Measure of Liquidity Based on the Funding Structure of Working Capital Requirement 79

Improving Liquidity Through Better Management of the Operating Cycle 81

Traditional Measures of Liquidity 89

Appendix 3.1 Financing Strategies 93

Appendix 3.2 Polo Ralph Lauren's Liquidity and Operational Efficiency 96

Chapter 4 Measuring Cash Flows 107

Cash Flows and Their Sources 108

Preparing a Detailed Cash Flow Statement 111

Two Variations of the Cash Flow Statement 119

Bankers' Cash Flow versus Net Operating Cash Flow 123

Managerial Implications 124

Appendix 4.1 Obtaining the Net Operating Cahs Flow From Balance Sheet and Income Statement Accounts 127

Appendix 4.2 Polo Ralph Lauren's Cash Flows 132

Chapter 5 Diagnosing Profitability, Risk, and Growth 141

Measures of Profitability 142

Return on Equity 143

Other Measures of Profitability 157

Financial Leverage and Risk 158

Self-Sustainable Growth 162

Appendix 5.1 Factors Affecting a Firm's Operating Profitability 169

Appendix 5.2 The Relationship Between a Firm's Roe and Its Aftertax Roic 173

Appendix 5.3 Polo Ralph Lauren's Profitability 174

Part III Investment Decisions

Chapter 6 Using the Net Present Value Rule to Make Value-Creating Investment Decisions 185

The Capital Investment Process 186

Would You Buy this Parcel of Land? 188

The Net Present Value Rule 190

Applying the Net Present Value Rule to a Capital Investment Decision 196

Why the NPV Rule is a Good Investment Rule 198

Special Cases of Capital Budgeting 205

Limitations of the Net Present Value Criterion 209

Appendix 6.1 Calculation of the Present Value of an Annuity and the Constant Annual-Equivalent Cash Flow of a Project's Cash-Flow Stream 215

Chapter 7 Alternatives to the Net Present Value Rule 221

The Payback Period 222

The Discounted Payback Period 226

The Internal Rate of Return (IRR) 229

The Profitability Index (PI) 236

Chapter 8 Identifying and Estimating a Project's Cash Flows 243

The Actual Cash-Flow Principle 243

The With/Without Principle 244

The Designer Desk Lamp Project 246

Identifying a Project's Relevant Cash Flows 249

Estimating a Project's Relevant Cash Flows 255

Should SMC Launch the New Product? 261

Part IV Financing Decisions

Chapter 9 Raising Capital and Valuing Securities 267

Estimating the Amount of Required External Funds 268

The Financial System: Its Structure and Functions 272

How Firms Issue Securities 279

Debt Capital: Characteristics and Valuation 285

Equity Capital: Characteristics and Valuation 299

Appendix 9.1 The Bond Valuation Formula 305

Appendix 9.2 The Valuation Formula for the Constant Growth Dividend Model 307

Chapter 10 Estimating the Cost of Capital 311

Identifying Proxy or Pure-Play Firms 313

Estimating the Cost of Debt 313

Estimating the Cost of Equity: The Divided Discount Model 315

Estimating the Cost of Equity: The Capital Asset Pricing Model 317

Estimating the Cost of Capital of a Firm 329

Estimating the Cost of Capital of a Project 333

Chapter 11 Designing a Capital Structure 347

The Capital Structure Decision: No Corporate Taxes and No Financial Distress Costs 348

Effect of Changes in Capital Structure on the Firm's Value: The Pizza Theory 353

The Capital Structure Decision: Corporate Income Taxes and No Financial Distress Costs 359

The Capital Structure Decision When Financial Distress is Costly 367

Formulating a Capital Structure Policy 370

Part V Business Decisions

Chapter 12 Valuing and Acquiring a Business 387

Alternative Valuation Methods 388

Valuing a Firm's Equity Using Comparables 390

Valuing a Firm's Assets and Equity Using the Discounted Cash Flow Approach 397

Estimating the DCF Value of OS Distributers' Assets and Equity 402

Estimating the Acquisition Value of OS Distributors 409

Estimating the Leveraged Buyout Value of OS Distributors 419

Appendix 12.1 The Dividend Discount Model Approach to the Valuation of a Firm's Equity 431

Chapter 13 Making Value-Creating Decisions in an International Environment 435

The Firm's Risk Exposure from Foreign Operations 436

The Foreign Exchange Market 439

Hedging Contractual Exposure to Currency Risk 442

Hedging Long-Term Contractual Exposure to Currency Risk with Swaps 454

The Relationships Among Exchange Rates, Inflation Rates, and Interest Rates 455

Analyzing an International Investment Project 460

Managing Country Risk 469

Appendix 13.1 Translating Financial Statements with the Monetary/Nonmonetary Method and the Current Method 473

Appendix 13.2 The Parity Relations 477

Chapter 14 Managing for Value Creation 487

Measuring Value Creation 488

Identifying the Drivers of Value Creation 495

Linking Operating Performance and Remuneration to Value Creation 500

Linking the Capital Budgeting Process to Value Creation 508

Putting it all Together: The Financial Strategy Matrix 512

Appendix 14.1 Adjusting Book Values to Estimate the Amount of Invested Equity Capital and Operating Profit 517

Appendix 14.2 Estimating Market Value Added (MVA) When Future Cash Flows are Expected to Grow at a Constant Rate in Perpetuity 520.

Notes:

Includes bibliographical references and index.

Local Notes:

Acquired for the Penn Libraries with assistance from the Class of 1932 Fund.

ISBN:

0324117752

OCLC:

46419916