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fundamental of financial management
[...]... edition of Fundamentals will meet its own challenge by contributing to a better understanding of our financial system EUGENE F BRIGHAM JOEL F HOUSTON 4723 N.W 53rd Ave., Suite A Gainesville, Florida 32653 fundamentals@joelhouston.com September 2008 xi BRIEF CONTENTS Preface PART 1 Introduction to Financial Management CHAPTER 1 An Overview of Financial Management PART 2 Fundamental Concepts in Financial Management. .. third ranking officer, is in charge of accounting, FIGURE 1-1 Finance within an Organization Board of Directors Chief Executive Officer (CEO) Chief Operating Officer (COO) Chief Financial Officer (CFO) Marketing, Production, Human Resources, and Other Operating Departments Accounting, Treasury, Credit, Legal, Capital Budgeting, and Investor Relations Chapter 1 An Overview of Financial Management financing,... Smyth Barry & Company 52 CHAPTER 3 Financial Statements, Cash Flow, and Taxes 53 The “Quality” of Financial Statements 53 PUTTING THINGS IN PERSPECTIVE PART 2 Fundamental Concepts in Financial Management 25 28 Citigroup Built to Compete in a Changing Environment 37 6 8 27 Financial Markets 30 2-2a Types of Markets 30 2-2b Recent Trends 31 2-3 2 3 1-2 26 Efficient Financial Markets Are Necessary for... Cost of Capital Creating Value at GE Coleman Technologies THOMSON ONE: BUSINESS SCHOOL EDITION Calculating 3M's Cost of Capital 334 WEB APPENDIX 10A The Cost of New Common Stock and WACC CHAPTER 11 The Basics of Capital Budgeting 306 306 PUTTING THINGS IN PERSPECTIVE 307 10-1 An Overview of the Weighted Average Cost of Capital (WACC) 307 10-2 Basic Definitions 10-3 Cost of Debt, rd (1 − T) 10-4 Cost of. .. 5 Financial Markets and Institutions Financial Statements, Cash Flow, and Taxes Analysis of Financial Statements Time Value of Money PART 3 Financial Assets CHAPTER CHAPTER CHAPTER CHAPTER 6 7 8 9 Interest Rates Bonds and Their Valuation Risk and Rates of Return Stocks and Their Valuation PART 4 Investing in Long-Term Assets: Capital Budgeting CHAPTER CHAPTER CHAPTER CHAPTER 10 11 12 13 The Cost of. .. own 100 shares of GE’s stock and the price is $40 per share, your wealth in GE is $4,000 The wealth of all of GE’s stockholders can be summed; and that is the value of the firm’s stock, the item that management should maximize The number of shares outstanding is a given, so what really determines shareholder wealth is the price of the stock Throughout this book, we will see that the value of any asset... chapter will give you an idea of what financial management is all about We begin the chapter by describing how finance is related to the overall business and by discussing the different forms of business organization For corporations, management s goal should be to maximize shareholder wealth, which means maximizing the value of the stock When we say “maximizing the value of the stock,” we mean the “true,... regarding the likely size of those cash flows Finance then grew out of and lies between economics and accounting, so people who work in finance need knowledge of those two fields Also, as discussed next, in the modern corporation, the accounting department falls under the control of the chief financial officer (CFO) 1-1b Finance within an Organization Most businesses and not-for-profit organizations have... Questions and Problems APPENDIX B Answers to Selected End -of- Chapter Problems APPENDIX C Selected Equations and Tables Index A-1 A-28 A-32 I-1 xiii CONTENTS Preface iii PART 1 Introduction to Financial Management 1 CHAPTER 1 An Overview of Financial Management Striking the Right Balance PUTTING THINGS IN PERSPECTIVE 2-1 The Capital Allocation Process 2-2 Financial Institutions What is Finance? 4 1-1a Finance... divided into three areas: (1) financial management, (2) capital markets, and (3) investments Financial management, also called corporate finance, focuses on decisions relating to how much and what types of assets to acquire, how to raise the capital needed to buy assets, and how to run the firm so as to maximize its value The same principles apply to both for-profit and not-for-profit organizations; and . 32653 fundamentals@joelhouston.com September 2008 Preface xi BRIEF CONTENTS Preface iii PART 1 Introduction to Financial Management 1 CHAPTER 1 An Overview of Financial Management 2 PART 2 Fundamental. Fundamental Concepts in Financial Management 25 CHAPTER 2 Financial Markets and Institutions 26 CHAPTER 3 Financial Statements, Cash Flow, and Taxes 53 CHAPTER 4 Analysis of Financial Statements. 1 Introduction to Financial Management 1 CHAPTER 1 An Overview of Financial Management 2 Striking the Right Balance 2 PUTTING THINGS IN PERSPECTIVE 3 1-1 What is Finance? 4 1-1a Finance versus Economics