Fundamentals Of Corporate Finance Australian 2nd Edition Berk Test Bank

Fundamentals Of Corporate Finance Australian 2nd Edition Berk Test Bank

Product details:

• ISBN-10 ‏ : ‎ 0730305422
• ISBN-13 ‏ : ‎ 978-0730305422
• Author:  Robert Parrino

Fundamentals of Corporate Finance 2e reflects the reality that Finance as an intellectual discipline continues to be challenged by the experiences and events of market activity. Following the global financial crisis (GFC), mangers have embarked on even more uncertain times. Thus, although the teaching of finance may have remained robust as a framework of conceptual thought, it is imperative that students come to realise that “finance is not physics”, by which we mean that even a concept as foundational to financial management as the capital asset pricing model (CAPM) should not be interpreted as a literal truth. This leads to a consideration of managing risk and risk management approaches as having behavioural aspects that are the outcomes of a manager’s or the firm’s accumulated experience. They cannot always be reduced to the simple directives of a quantitative algorithm.

Table contents:

PART ONE
Overview of Corporate Finance
Chapter 1
Introduction to Corporate Finance 1
1.1 Corporate Finance and the
Financial Manager 2
What Is Corporate Finance? 2
The Financial Manager 2
Financial Management Decisions 2
Capital Budgeting 2
Capital Structure 3
Working Capital Management 4
Conclusion 4
1.2 Forms of Business Organization 4
Sole Proprietorship 5
Partnership 5
Corporation 6
A Corporation by Another Name . . . 7
1.3 The Goal of Financial Management 8
Possible Goals 8
The Goal of Financial Management 9
A More General Goal 9
1.4 The Agency Problem and Control
of the Corporation 10
Agency Relationships 10
Management Goals 10
Do Managers Act in the Stockholders? Interests? 12
Managerial Compensation 12
Control of the Firm 13
Conclusion 14
Stakeholders 14
1.5 Financial Markets and the Corporation 14
Cash Flows to and from the Firm 14
Primary versus Secondary Markets 15
Primary Markets 15
Secondary Markets 16
1.6 Summary and Conclusions 17
Chapter 2
Financial Statements, Taxes,
and Cash Flow 20
2.1 The Balance Sheet 21
Assets: The Left-Hand Side 21
Liabilities and Owners? Equity: The Right-Hand Side 21
>>
Net Working Capital 22
Liquidity 23
Debt versus Equity 24
Market Value versus Book Value 24
2.2 The Income Statement 25
GAAP and the Income Statement 26
Noncash Items 27
Time and Costs 27
2.3 Taxes 29
Corporate Tax Rates 29
Average versus Marginal Tax Rates 29
2.4 Cash Flow 31
Cash Flow from Assets 32
Operating Cash Flow 32
Capital Spending 33
Change in Net Working Capital 33
Conclusion 34
A Note on "Free" Cash Flow 34
Cash Flow to Creditors and Stockholders 34
Cash Flow to Creditors 34
Cash Flow to Stockholders 35
An Example: Cash Flows for Dole Cola 36
Operating Cash Flow 36
Net Capital Spending 37
Change in NWC and Cash Flow from Assets 37
Cash Flow to Stockholders and Creditors 38
2.5 Summary and Conclusions 39
PART TWO
Financial Statements and Long-Term
Financial Planning
Chapter 3
Working with Financial Statements 48
3.1 Cash Flow and Financial Statements:
A Closer Look 49
Sources and Uses of Cash 49
The Statement of Cash Flows 51
3.2 Standardized Financial Statements 53
Common-Size Statements 53
Common-Size Balance Sheets 54
Common-Size Income Statements 54
Common-Size Statements of Cash Flows 55
Common?Base Year Financial Statements:
Trend Analysis 55
Combined Common-Size and Base-Year Analysis 56
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3.3 Ratio Analysis 56
Short-Term Solvency, or Liquidity, Measures 57
Current Ratio 58
The Quick (or Acid-Test) Ratio 59
Other Liquidity Ratios 59
Long-Term Solvency Measures 60
Total Debt Ratio 60
A Brief Digression: Total Capitalization versus
Total Assets 61
Times Interest Earned 61
Cash Coverage 61
Asset Management, or Turnover, Measures 62
Inventory Turnover and Days? Sales in Inventory 62
Receivables Turnover and Days? Sales in Receivables 63
Asset Turnover Ratios 64
Profitability Measures 64
Profit Margin 65
Return on Assets 65
Return on Equity 65
Market Value Measures 66
Price-Earnings Ratio 66
Market-to-Book Ratio 67
Conclusion 68
3.4 The Du Pont Identity 68
A Closer Look at ROE 68
An Expanded Du Pont Analysis 70
3.5 Using Financial Statement Information 71
Why Evaluate Financial Statements? 72
Internal Uses 72
External Uses 72
Choosing a Benchmark 72
Time-Trend Analysis 72
Peer Group Analysis 73
Problems with Financial Statement Analysis 77
3.6 Summary and Conclusions 78
Chapter 4
Long-Term Financial Planning
and Growth 90
4.1 What Is Financial Planning? 91
Growth as a Financial Management Goal 91
Dimensions of Financial Planning 92
What Can Planning Acccomplish? 93
Examining Interactions 93
Exploring Options 93
Avoiding Surprises 93
Ensuring Feasibility and Internal Consistency 93
Conclusion 94
4.2 Financial Planning Models: A First Look 94
A Financial Planning Model:The Ingredients 94
Sales Forecast 94
Pro Forma Statements 94
Asset Requirements 95
Financial Requirements 95
The Plug 95
Economic Assumptions 95
A Simple Financial Planning Model 95
4.3 The Percentage of Sales Approach 97
The Income Statement 97
The Balance Sheet 98
A Particular Scenario 99
An Alternative Scenario 100
4.4 External Financing and Growth 102
EFN and Growth 104
Financial Policy and Growth 106
The Internal Growth Rate 106
The Sustainable Growth Rate 107
Determinants of Growth 108
A Note on Sustainable Growth Rate Calculations 109
4.5 Some Caveats Regarding Financial
Planning Models 111
4.6 Summary and Conclusions 111
PART THREE
Valuation of Future Cash Flows
Chapter 5
Introduction to Valuation:
The Time Value of Money 124
5.1 Future Value and Compounding 125
Investing for a Single Period 125
Investing for More Than One Period 125
A Note on Compound Growth 131
5.2 Present Value and Discounting 132
The Single-Period Case 132
Present Values for Multiple Periods 133
5.3 More on Present and Future Values 136
Present versus Future Value 136
Determining the Discount Rate 137
Finding the Number of Periods 141
5.4 Summary and Conclusions 144
Chapter 6
Discounted Cash Flow Valuation 149
6.1 Future and Present Values of
Multiple Cash Flows 150
Future Value with Multiple Cash Flows 150
Present Value with Multiple Cash Flows 153
A Note on Cash Flow Timing 156
6.2 Valuing Level Cash Flows:
Annuities and Perpetuities 157
Present Value for Annuity Cash Flows 157
Annuity Tables 159
Finding the Payment 160
Finding the Rate 162
Future Value for Annuities 163
A Note on Annuities Due 164
Perpetuities 165
6.3 Comparing Rates:The Effect
of Compounding 167
Effective Annual Rates and Compounding 167
Calculating and Comparing Effective
Annual Rates 168
EARs and APRs 170
Taking It to the Limit: A Note on
Continuous Compounding 171
6.4 Loan Types and Loan Amortization 172
Pure Discount Loans 172
Interest-Only Loans 173
Amortized Loans 173
6.5 Summary and Conclusions 178
Chapter 7
Interest Rates and Bond
Valuation 192
7.1 Bonds and Bond Valuation 193
Bond Features and Prices 193
Bond Values and Yields 193
Interest Rate Risk 197
Finding the Yield to Maturity: More Trial
and Error 198
7.2 More on Bond Features 203
Is It Debt or Equity? 203
Long-Term Debt: The Basics 203
The Indenture 205
Terms of a Bond 205
Security 206
Seniority 206
Repayment 206
The Call Provision 207
Protective Covenants 207
7.3 Bond Ratings 208
7.4 Some Different Types of Bonds 209
Government Bonds 209
Zero Coupon Bonds 210
Floating-Rate Bonds 211
Other Types of Bonds 212
7.5 Bond Markets 214
How Bonds Are Bought and Sold 214
Bond Price Reporting 216
A Note on Bond Price Quotes 219
7.6 Inflation and Interest Rates 219
Real versus Nominal Rates 219
The Fisher Effect 220
7.7 Determinants of Bond Yields 221
The Term Structure of Interest Rates 221
Bond Yields and the Yield Curve: Putting
It All Together 223
Conclusion 225
7.8 Summary and Conclusions 226
Chapter 8
Stock Valuation 233
8.1 Common Stock Valuation 234
Cash Flows 234
Some Special Cases 236
Zero Growth 236
Constant Growth 236
Nonconstant Growth 239
Components of the Required Return 241
8.2 Some Features of Common and
Preferred Stocks 243
Common Stock Features 243
Shareholder Rights 243
Proxy Voting 244
Classes of Stock 245
Other Rights 245
Dividends 245
Preferred Stock Features 246
Stated Value 246
Cumulative and Noncumulative Dividends 246
Is Preferred Stock Really Debt? 247
8.3 The Stock Markets 247
Dealers and Brokers 247
Organization of the NYSE 248
Members 248
Operations 249
Floor Activity 249
NASDAQ Operations 250
NASDAQ Participants 251
Stock Market Reporting 252
8.4 Summary and Conclusions 254
PART FOUR
Capital Budgeting
Chapter 9
Net Present Value and Other
Investment Criteria 261
9.1 Net Present Value 262
The Basic Idea 262
Estimating Net Present Value 263
9.2 The Payback Rule 266
Defining the Rule 266
Analyzing the Rule 267
Redeeming Qualities of the Rule 268
Summary of the Rule 269
9.3 The Discounted Payback 269
9.4 The Average Accounting Return 272
9.5 The Internal Rate of Return 274
Problems with the IRR 278
Nonconventional Cash Flows 278
Mutually Exclusive Investments 280
Redeeming Qualities of the IRR 282
9.6 The Profitability Index 283
9.7 The Practice of Capital Budgeting 284
9.8 Summary and Conclusions 286
Chapter 10
Making Capital Investment
Decisions 295

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