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Internet Links For Further Reading Brigham, Eugene F., and Joel F. Houston, Fundamentals of Financial Management (with Thomson ONE—Business School Edition), 12th ed. (Mason, OH: South-Western College Publishing, 2008). Gallagher, Timothy J., and Joseph D. Andrew, Financial Management: Principles & Practice, 4th ed. (Freeload Press, 2007). Hafer, Rik, and Speros Margetis, A Student’s Quick Guide to Understanding and Calculating Time Value of Money and Its Applications, 1st ed. (Cengage Learning, 2005). Van Horne, James C., and John M. Wachowicz, Fundamentals of Financial Management, 12th ed. (Upper Saddle River, NJ: Prentice-Hall, 2004). 5 Capital Structure Craig A. Stephenson
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Table of Contents Title Page Copyri
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Chapter 6 - Planning Capital Expend
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For Further Reading Part IV - Manag
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Successful Postmerger Implementatio
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This book is printed on acid-free p
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Syllabus How Chapter Topics in This
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Some of these experts are full-time
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About the Contributors Richard T. B
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Advances in Quantitative Analysis o
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enterprise development. Dr. Zachara
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The left side shows Nutrimin‟s in
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Gail, let‟s go over this balance
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Gail, do you have any questions abo
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11. Not all expenses are cash outfl
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Financial Statements: Who Uses Them
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profitability to keep investing for
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Financial Accounting Standards It i
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Downloadable Resources for this cha
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Next, we explain each of these thre
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liquidity. Or, more simply, achievi
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If these ratios are seriously defic
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The debt-to-equity ratio is evaluat
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year 1 to year 3. The net effect wa
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to rate of return on the equity. Th
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Other types of comparisons of finan
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income/sales), asset turnover (sale
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successful businesspeople should ha
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More than a decade ago, a special c
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companies is used for illustration.
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The identification of nonrecurring
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The Dow Chemical single-step income
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is a pretax measure, but income fro
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Sources: Companies‟ annual report
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Exhibit 3.11 Examples of discontinu
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amortization purposes, the Company
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Examples of nonrecurring items disc
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During Fiscal 2006, inventory quant
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The nonrecurring items of Boston Sc
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The disclosure presented earlier in
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gains or losses that appear as part
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ecurring as for Kimberly-Clark, the
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Summarizing Nonrecurring Items and
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This example of using the SEB works
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Exhibit 3.27 Other income (expense)
Page 97 and 98: Source: Pfizer, Inc., annual report
Page 99 and 100: Exhibit 3.30 Acquisitions note: Pfi
Page 101 and 102: Source: Pfizer, Inc., annual report
Page 103 and 104: Exhibit 3.33 Cost-reduction initiat
Page 105 and 106: Exhibit 3.36 Share-based payment no
Page 107: The Pfizer Worksheet Analysis: Down
Page 110 and 111: Some Further Points on the Pfizer W
Page 112 and 113: • It is common to treat items as
Page 114 and 115: FedEx Corporation (2007) First Sola
Page 116 and 117: 1 The American Institute of Certifi
Page 118 and 119: 28 These alternative translation me
Page 120 and 121: If you need some instruction in Exc
Page 122 and 123: To solve using Excel, open your Exc
Page 124 and 125: As you can see from the previous ex
Page 126 and 127: C6 = 5 • Now enter the “=” si
Page 128 and 129: Ordinary Annuity An ordinary annuit
Page 130 and 131: To confirm that the number of payme
Page 132 and 133: The FV of this first payment into t
Page 134 and 135: Exhibit 4.15 Finding the future val
Page 136 and 137: Exhibit 4.18 Finding the present va
Page 138 and 139: From Exhibit 4.20, we see that as t
Page 140 and 141: Exhibit 4.22 Amortization schedule
Page 142 and 143: Exhibit 4.25 Regular cash flows wit
Page 147 and 148: Financial managers perform many tas
Page 149 and 150: Research on the common stock of the
Page 151 and 152: 1. Calculate the arithmetic mean re
Page 153 and 154: Correlation measures the joint vari
Page 155 and 156: contributes less to the standard de
Page 157 and 158: Finally, if the numerator in the be
Page 159 and 160: The last bit of information require
Page 161 and 162: Cost of Debt and Equity Capital We
Page 163 and 164: If the firm has preferred stock in
Page 165 and 166: The cost of capital for Disney, bas
Page 167 and 168: It is important to understand how c
Page 169 and 170: the newly offered shares. Outside i
Page 171 and 172: Company A has insufficient cash flo
Page 173 and 174: With these inputs the Excel functio
Page 175 and 176: Hudson is growing quickly in the ye
Page 177 and 178: sufficient information to determine
Page 179 and 180: peer to Gracie, then Hudson‟s tot
Page 181: Steven P. Feinstein
Page 185 and 186: The first step in calculating a pro
Page 187 and 188: Treatment of Net Working Capital Ch
Page 189 and 190: The reason for omitting interest ex
Page 191 and 192: Sunk Costs Sunk costs are expenses
Page 193 and 194: Similarly, the year 2 cash flow was
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It makes sense that project C shoul
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scope of this chapter, but the text
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Because leverage increases the risk
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A project‟s internal rate of retu
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home buyer finance the same house,
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Brealey, Richard A., and Stewart C.
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one unit of currency in another cou
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Exhibit 7.4 Time line in pounds and
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Exhibit 7.5 Amount of euros (€) p
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happened to the value of the invest
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Political risk comes from changes i
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Useful information from the World B
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Step 2 Determine the discrete proba
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There are some at Robinson who reco
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In his final presentation, he noted
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As you can imagine, the presentatio
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It is possible to use contracts to
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choices intelligently and effective
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Reflecting its status as the defaul
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As you might expect, given the limi
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Recognition of Corporations and Lim
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Limited Liability Companies Most st
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This complexity or flexibility does
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piece of the equity of their operat
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which normally must consider it and
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Limited partners will normally have
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and, in a novel decision, pierced t
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to page 1, where it is added to (or
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Corporations Corporations are norma
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eturns of its stockholders in propo
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forms. Other forms exist, such as t
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The hotel venture contemplated by B
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epayment schedule. Lauren and Clair
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Most entrepreneurs long for the day
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any strategy he adopts, the gifts o
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past, Morris has always attempted t
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will also result in acquisition of
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the amount of such deductions will
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the earnings are taxed currently. T
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eturn of the interest is a gift and
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Taxability of Stock Options If Morr
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The taxation of restricted stock is
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may be used by such taxpayer, free
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This technique appears so attractiv
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Thus, Morris‟s plan to turn in hi
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Redemptions to Pay Death Taxes and
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eneficiaries of the stockholders‟
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a subsidiary corporation, wholly ow
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As for the risk of double taxation,
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Until the late 1990s, only a few oc
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• Baptist Foundation of Arizona w
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ineffective audit committees. SOX e
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the takeover threat, and gives it t
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The Integrity of Financial Accounti
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eaffirm their core operating strate
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more difficult to quantify the impa
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individuals need to understand thei
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When actual prices and quantities a
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The Structure of Budgets Regardless
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For C&G‟s Gift Shop, expected sal
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The Financial Budget The financial
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Budgeted Accrued Expenses (34) Expe
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Net cash flows from financing activ
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Many other statistical techniques c
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Naturally, the term profit plan is
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that are not direct measures of ben
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www.bbrt.org CAM-I Beyond Budgeting
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In the highly volatile markets of t
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As stated earlier, analysts focus t
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It also should be clear why the fix
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Scenario 2 might be a volume increa
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(that is, overall sales would remai
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Exhibit 12.7 illustrates the extrem
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targeted set of customers with more
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incremental revenue, and at 77% con
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Of course, this is only one indicat
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William C. Lawler
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these competitors to invest in both
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Company executives were amazed at t
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Exhibit 13.5 Transaction processing
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The preceding example provides a nu
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Having identified the appropriate l
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1. Divide the indirect channel part
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If Airborne attains 80% of capacity
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5 John Shank and Vijay Govindarajan
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an entrepreneur might spend trying
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One of the major goals of business
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Finally, the cover should be eye-ca
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• Description of Opportunity. •
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the wave of the emerging technology
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Finding information about your comp
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Marketing Plan Up to this point we
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This section identifies how you wil
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Those estimates can then be aggrega
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operational business plan, the leve
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Team Georges Doriot, the father of
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Market Interest and Growth Potentia
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Financial Plan If the proceeding pl
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Business Plan Preparation Sites www
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Kim, C., and R. Mauborgne, Blue Oce
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In recent years there has been revo
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Experts are still divided over what
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low a price. By the time it found t
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At this point, in September 1998, a
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The lesson from these case studies
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for the machinery you bought. You v
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Upon expiration, the futures contra
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holding the underlying spot instrum
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A call option is an asset that give
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emain low, below the strike price,
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executives who became fabulously we
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A Protective Put Strategy A put opt
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Interest Rate Swaps The most common
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debt, but might help a pension fund
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tolerate a 10% rise in copper price
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It has been said that estimating th
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An Overview of the Business Valuati
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Acme has had research and developme
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Income Statement Analysis Victoria
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Acme reported consistent profitabil
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The purpose of this part of Victori
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Bob asks Victoria to explain the co
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As discussed earlier, financial sta
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An error when using the income appr
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Cost of Equity As discussed earlier
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Furthermore, she estimates Acme‟s
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The residual value is based on the
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• Market value of invested capita
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approach. Furthermore, she used pri
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• Eliminate the owners‟ nonbusi
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Pratt, Shannon P., and Alina V. Nic
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As we can see, acquisitions may occ
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Recent Trends and the Performance R
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2. Returns to bidders have fallen o
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Exhibit 17.7 Disaster deal #3: AT&T
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equipment were third-world regions.
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When Chambers felt comfortable that
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V AB - (V A + V B ), is the increme
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Finally, the acquisition of a compe
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Example 4: Consider two firms, A an
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The total value created by the acqu
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investors may anticipate this and v
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Lean‟s equity has increased by th
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3. Inability to implement change. 4
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Summary and Conclusions Mergers and
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8 “Cisco Changes Tack in Takeover
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Outsourcing Theodore Grossman
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increase margins. The last thing a
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Of companies outsourcing, 44% repor
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work long hours in subhuman conditi
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Companies and their outsourced part
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IBM, and Accenture are willing to a
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Beware of companies that do not wan
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The specification of the project is
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contract through poor performance o
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2 Ibid. 3 Ibid. For Further Reading
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Of all the chapters in this book, t
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and smaller devices. Over the past
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Today‟s PDAs have a touch screen
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drives. These portable storage devi
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(LAN) so that they can share printe
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PowerPoint (presentation graphics),
Page 538 and 539:
Exhibits 19.3 Pro forma income stat
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elative addressing (change cell add
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Most current tools also offer the u
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Instant messaging (IM) (AIM is one
Page 546 and 547:
Often, a manager is faced with the
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within a corporate network are usua
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Web browsers do have the ability to
Page 552 and 553:
Multimedia By the latter half of th
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Note 1 Updated—based on work done
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The information technology (IT) and
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These systems are focused on how ef
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point-of-sale transactions are ente
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E-commerce (electronic commerce) ha
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generated queries against a databas
Page 568 and 569:
Consider a BI model for a chain of
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Source: Information Builders. An ex
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have taken this evolution to a new
Page 574 and 575:
through interconnected networks. Th
Page 576 and 577:
However, the customer relinquishes
Page 578 and 579:
The following scenario depicts what
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Field names are shown with syntax o
Page 582 and 583:
in the early 1970s. The network was
Page 584 and 585:
Controls Because the initial softwa
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of data privacy. Organizations need
Page 590 and 591:
Note 1 Updated from a previous chap
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Unless you picked up this book at t
Page 596 and 597:
The corporate finance role is inten
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a class invest in a broad range of
Page 600 and 601:
Within commercial real estate, MBAs
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the power of the brand. As you thin
Page 604 and 605:
Shift your resume from “This is w
Page 606 and 607:
In many ways the cover letter can b
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considering a career in investment
Page 610 and 611:
First Stage Key Contacts These are
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In this case, you will be speaking
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3 http://hedgeweek.com (HedgeMedia
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financial expertise. The purpose of
Page 621 and 622:
Cost approach: A general way of est
Page 623 and 624:
Fair market value: The price, expre
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Internal control: The policies and
Page 627 and 628:
Multistep income statement: An inco
Page 629 and 630:
Psychographic data: Information tha
Page 631 and 632:
Tax-adjusted nonrecurring items: Pr
Page 633 and 634:
Accounting systems Accounts payable
Page 635 and 636:
American Institute of Certified Pub
Page 637 and 638:
Audit firms‟ conflict of interest
Page 639 and 640:
udgeted accounts payable budgeted a
Page 641 and 642:
Buildup method Built-in gain Burn r
Page 643 and 644:
taxation transferability of interes
Page 645 and 646:
standards three approaches to value
Page 647 and 648:
Capital structure bond valuation ca
Page 649 and 650:
Cash-basis taxpayer, accounts recei
Page 651 and 652:
Classification Clayton Act of 1914,
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limited liability companies limited
Page 655 and 656:
Cost of capital Cost of debt Cost o
Page 657 and 658:
Cross-border deals Cross-docking Cr
Page 659 and 660:
Decision rules Decision support sys
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Discontinued operations note Discou
Page 663 and 664:
Domain name servers (DNS) Domestic
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uy-sell agreements family limited p
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Financial advisor position Financia
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Forecasting Forecasts Forecasts and
Page 671 and 672:
Gain vs. loss Gantt chart Gap analy
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central processing unit (CPU) hard
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Independent CPA Index of Economic F
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estatements of previously published
Page 679 and 680:
Irregular cash flow IRS Form 1040 S
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control conversion to formation, of
Page 683 and 684:
hardware software Margin analysis M
Page 685 and 686:
Microsoft Outlook Microsoft PowerPo
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associations careers in finance e-c
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Objectives Object-oriented programm
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Other income (expense) note Out-of-
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Payback period Payment card industr
Page 695 and 696:
Pooling of interest method Porter
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Private wealth management Privilege
Page 699 and 700:
Quantify the material Quantity vari
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Revenue enhancement Revenue growth
Page 703 and 704:
Security market line (SML) Segment
Page 705 and 706:
networks and communication open sou
Page 707 and 708:
Stock transfer Story model Straddle
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Takeovers Tangible goals Target Tar
Page 711 and 712:
Tax savings Tax shelters Tax shield
Page 713 and 714:
centralized resource allocation fin
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private wealth management. venture
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World Factbook (CIA) World Wide Web
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