Press extracts
Illustrations
Preface
Guided Tour
Technology to enhance learning and teaching
Acknowledgements

PART I: Corporate finance
Introduction to Part I
1 The financial environment
Learning objectives
Introduction
Corporate finance and financial strategy
Types of business entity
Business organisational structures
Financial statements
Accountability and financial reporting
Managing corporate finance
Underlying principles of corporate finance
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

2 Corporate objectives
Learning objectives
Introduction
Strategic management
Corporate objectives
Financial strategy
Efficient market hypothesis
Shareholder value
Strategic financial decisions
The agency problem
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

3 Corporate governance
Learning objectives
Introduction
Corporate governance code of practice
The audit and the role of auditors
Directors’ responsibilities
Insolvency
Wrongful trading
Fraudulent trading
Disqualification of directors
Summary of directors’ obligations and responsibilities
Actions to ensure compliance
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

4 Capital investment decisions
Learning objectives
Introduction
What is an investment?
Future values, present values, perpetuities, and annuities
Investment appraisal methods
Advantages and disadvantages of the five investment appraisal methods
Other factors affecting investment decisions
Risk and uncertainty and decision-making – sensitivity analysis
Equivalent annual cost (EAC)
Capital budgeting
Control of capital investment projects
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

5 Risk, return, and portfolio theory
Learning objectives
Introduction
The relationship between risk and return
Investor attitudes to risk
Business risk and financial risk
The impact of risk on financing
Systematic and unsystematic risk
Diversification
Risk measurement
Portfolio risks and returns
Markowitz’s portfolio theory
Risk-free investments
Capital market line (CML)
Investors’ preferences
The return on the market portfolio
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

6 Capital structure and the cost of capital
Learning objectives
Introduction
Capital asset pricing model (CAPM)
Cost of equity
Simple dividend growth model
Cost of debt
Weighted average cost of capital (WACC)
Capital structure
Gearing – debt and equity
Optimal capital structure
Traditional approach to capital structure (or financial structure)
Miller and Modigliani (I) net income approach to capital structure
Miller and Modigliani (II) market imperfections approach to capital structure
Further approaches to capital structure
Summary of key points
Glossary of key terms
Questions
Discussion points Exercises

7 Sources of finance and the capital markets
Learning objectives
Introduction
Sources of finance internal to the business
Short-term external sources of finance
Long-term external sources of finance
The capital markets
Financial institutions
Islamic banking and Islamic finance
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

8 Financial analysis
Learning objectives
Introduction
The performance review process
Limitations of the performance review process
Economic performance measurement
Ratio analysis
Return on equity (ROE), return on assets (ROA), and the Du Pont system
Horizontal analysis
Vertical analysis
Segmental reporting
Cash versus profit, and EBITDA, EVA™, and MVA
Predicting corporate financial failure
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

9 Financial planning
Learning objectives
Introduction
The strategic view
The purpose of financial planning
The financial planning process
Financial modelling
The role of forecasting
Cash flow forecasting and planning
Planning for growth
Financing growth
Strategic performance assessment
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises
Case study I: Gegin

10 Management of working capital
Learning objectives
Introduction
Working capital and working capital requirement
Working capital management as a strategic tool
Working capital policy
Stocks management
Just in time (JIT), materials requirement planning (MRP), and optimised production technology (OPT)
Debtors and credit management
Creditors management
Operating cycle performance
Cash improvement techniques
Short-term cash flow improvement
Long-term cash flow improvement
Cash management
Summary of key points
Glossary of key terms
Questions
Discussion points Exercises

11 International operations and investment
Learning objectives
Introduction
Internationalisation
Why companies undertake international operations
Types of international operation
International investment appraisal
International investment cost of capital
Financing international investment
Risk and international investment
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

12 Financial risk management
Learning objectives
Introduction
Risk and uncertainty
Types of financial risk
Exchange rate equivalency model
Interest rate risk
Exchange rate risk
Financial risk management
Hedging financial risks
The use of derivatives
Financial risk management strategy
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises
Case study II: Millpot

PART II: Financial strategy
Introduction to Part II
13 The business life cycle and financial strategy
Learning objectives
Introduction
Product life cycle (PLC)
Boston Consulting Group (BCG) matrix
The business life cycle (BLC)
Business risk and the life cycle
Financial risk and its inverse correlation with business risk eps and net cash flow and the life cycle
Sources of funding and the life cycle
Dividends and the life cycle
Shareholders’ returns and the life cycle
Price/earnings (P/E) ratio, the share price, and the life cycle
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

14 Financial strategies from start-up to growth
Learning objectives
Introduction
A profile of start-up businesses
Sources of support for a start-up business
Venture capitalists (VCs)
Risk and return in start-up
A profile of growth businesses
The transition from start-up to growth
A change in the profile of investors
Risk and return in growth
Types of capital market
The flotation of a company – initial public offering (IPO)
Financing new projects
Rights issues
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises
Case study III: Derlex
Case study IV: Bircom

15 Financial strategies from growth to maturity to decline
Learning objectives
Introduction
The turbulence phase of the business life cycle
A profile of mature businesses The transition from growth to maturity
Risk and return in maturity
Debt financing in maturity
Dividends – why are they paid? Dividend policy and payment of dividends
Dividend policy – some practical issues
The dividend argument – relevancy and irrelevancy
Takeover targets
A profile of declining businesses
Risk and return in decline
Strategies to delay decline
Reducing the debt ratio
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises
Case study V: Kite

16 Mergers and acquisitions (M&As)
Learning objectives
Introduction
What are mergers, acquisitions, amalgamations, and takeovers?
Underlying principles of M&As
Types of M&A
Reasons and justifications for M&As
Financial motives in M&As
Managerial motives in M&As
Target company valuation
Other reasons for share valuation
Some further share valuation models
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

17 Financial strategies in M&As
Learning objectives
Introduction
Financing acquisitions
Debt versus equity in financing acquisitions
Financial strategy in acquisitions
Takeover pre-bid defences
Takeover post-bid defences
The position of shareholders, managers, employees, and financial institutions in M&As
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises

18 Reorganisations and restructuring
Learning objectives
Introduction
Reasons for reorganisations and restructuring
Reorganisation – financial strategies in response to internal issues
Reorganisation – financial strategies in response to external issues
Demergers
Privatisation – sale by Government
Privatisation – return to private ownership
Management buy-outs (MBOs)
Management buy-ins (MBIs)
Problems with MBOs and MBIs
Summary of key points
Glossary of key terms
Questions
Discussion points
Exercises
Case study VI: Chamberlain

Appendices
1 Present value tables
2 Solutions to selected exercises
Index