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Preface
Since the third edition of this book was published in late 2001, much has happened to reshape the
business world as we now know it. Our financial system almost collapsed. Stalwarts like Lehman
Brothers and Merrill Lynch ceased to exist because they had assumed huge risk in financial
instruments that were vastly overvalued. The mortgage market collapsed and along with it went a host
of financial companies and banks that had invested in subprime mortgage-backed securities. Bernie
Madoff went from obscurity to become a household name after allegedly bilking investors out of
approximately $50 billion in the largest-ever Ponzi scheme. The stock market lost 35% of its value.
Personal 401(k) retirement accounts were devastated, and people had to rethink their retirement plans.
Companies planning to use their stock to finance the purchase of acquisitions found that the value of
their stock had plunged. Credit became tight and financing difficult.
As a result of the Enron scandal, corporate governance has become a hot topic, with potential
liability for CEOs and CFOs and with much increased and highly expensive and cumbersome added
requirements for internal control imposed by the 2002 Sarbanes-Oxley Act.
All of these issues have created a new financial world that requires special skills for a manager to
succeed. Do you have those skill sets?
Do you know how to accomplish these important business tasks?
• Understand financial statements.
• Measure liquidity of a business.
• Analyze business profitability.
• Differentiate between regular income and extraordinary items.
• Predict future bankruptcy for an enterprise.
• Prepare a budget.
• Do a break-even analysis.
• Figure out return on investment.
• Compute the cost of capital.
• Put together a business plan.
• Legitimately minimize income taxes payable by you or your business.
• Decide what your obligations are as an officer or director of the company.
• Determine the implications of outsourcing a product, a function, or a project either
domestically or internationally.
• Manage foreign currency exposure.
• Evaluate a merger or acquisition target.
• Serve as a director of a corporation.
• Build a successful e-business.
• Understand and use financial derivatives.
• Use information technology for competitive advantage.
• Value a business.
These are some of the key topics explained in this book. It is a book designed to help you learn the
basics in finance and accounting, without incurring the considerable time and expense of a formal
MBA program. The book consists of valuable, practical how-to information, applicable to an entire
range of businesses, from the smallest start-up to the largest corporations in the world. Each chapter of
the book has been written by an outstanding expert in the subject matter of that particular chapter.