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Kim, C., and R. Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant (Boston: Harvard Business School Press, 2005). Timmons, J., A. Zacharakis, and S. Spinelli, Business Plans That Work (New York: McGraw-Hill, 2004). 15 Financial Management of Risks Steven P. Feinstein
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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)
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Source: Pfizer, Inc., annual report
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Exhibit 3.30 Acquisitions note: Pfi
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Source: Pfizer, Inc., annual report
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Exhibit 3.33 Cost-reduction initiat
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Exhibit 3.36 Share-based payment no
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The Pfizer Worksheet Analysis: Down
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Some Further Points on the Pfizer W
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• It is common to treat items as
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FedEx Corporation (2007) First Sola
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1 The American Institute of Certifi
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28 These alternative translation me
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If you need some instruction in Exc
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To solve using Excel, open your Exc
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As you can see from the previous ex
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C6 = 5 • Now enter the “=” si
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Ordinary Annuity An ordinary annuit
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To confirm that the number of payme
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The FV of this first payment into t
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Exhibit 4.15 Finding the future val
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Exhibit 4.18 Finding the present va
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From Exhibit 4.20, we see that as t
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Exhibit 4.22 Amortization schedule
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Exhibit 4.25 Regular cash flows wit
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Internet Links For Further Reading
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Investors who are risk averse will
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considering the risk of a single as
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Portfolio Risk Stand-alone risk is
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In spite of unique or diversifiable
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If a particular stock is highly sus
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The formula tells us that, to begin
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for the entire market of stocks sin
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The dividend per share for preferre
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If you are able to determine the cu
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Debt finance is the lower-cost meth
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We don‟t observe many firms whose
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Capital Structure in Practice Finan
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are able to observe regularities in
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dividends and capital gains. We wil
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where EBIT is earnings before inter
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Since long-term debt holders have a
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accept more investment projects. Re
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A beer company is considering build
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accounts receivable, and tabulates
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profit by the tax rate determines t
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Accounting profit often mixes varia
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The concept that future cash flows
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Like project A, project C also cost
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The after-tax interest rate is the
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equal mix of debt and equity, its d
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The payback period rule stipulates
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The IRR rule is appealing in that i
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complete with its real options is g
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What does it matter that one invest
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Exhibit 7.3 Time line in dollars an
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There are a number of countries in
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eturn of 10% on its investments in
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Exhibit 7.12 Summary of exchange ra
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and so will the value of the liabil
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Source: CIA, World Factbook, availa
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Exhibit 7.18 Net present value of c
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equired interest payments to be pai
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So if the assistant treasurer was r
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This theory is far from perfect, as
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The Consulting Firm Jennifer, Jean,
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part by a statute, the Uniform Limi
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formation in Delaware (or any state
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purpose of requiring qualification.
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Phil‟s death may terminate the bu
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the transfer. This means that if Br
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These rules extend to tort liabilit
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In the absence of a meeting, stockh
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A more detailed discussion on the b
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Partnerships If possible, the resul
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associated with this arrangement ar
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Partnerships are also not separate
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For most start-up businesses, howev
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form, even at the risk of some unli
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likely that our consultants will be
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Thus, the corporation and LLC, with
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It is not possible to fully describ
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usiness corporation for all purpose
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a cash-basis taxpayer to be taxed a
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The Tax Reform Act of 1986 substant
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limit is the product of the value o
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he would have spent anyway. In fact
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protect Brad from the scenario of h
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paying for the privilege. If the st
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The second tax scenario attaches to
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include that nullity in his taxable
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then the capital gain to be taxed h
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Most relevant to Morris is Section
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To begin with, the ESOP will have t
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general partner of a limited partne
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small businesses) is also subject t
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oth Lisa and Brad would be free to
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Assume that a limited liability com
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corporations, and had been audited
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There is plenty of blame from the c
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• An important study about top ma
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• The federal government made at
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$79.7 million for other services, a
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Budgets offer a variety of benefits
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determine the impact of specific pr
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Exhibit 11.2 Budget variance report
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udget, we just add more to it next
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income statement. The financial bud
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For a manufacturing company, cost o
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C&G‟s Gift Shop has a policy to m
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Meeting cash obligations as they co
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was unusually low, say, due to the
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A fixed budget, sometimes called a
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A large part of the budget selling
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• Centralized resource allocation
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Merewitz, Leonard, and Stephen H. S
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This chapter starts with a discussi
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Interestingly the numbers for quart
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Exhibit 12.4 Scenarion analysis.
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Pitfalls Although this analytic tec
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Exhibit 12.6 Variable cost element
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Variable Cost as a Function of Outp
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If scenario 2 yields a lower profit
Page 351 and 352: Microsoft certainly does not price
Page 353 and 354: If it is determined that dumping ha
Page 357 and 358: Leaving government agencies and not
Page 359 and 360: transaction processing. Each proces
Page 361 and 362: Exhibit 13.3 E-commerce transaction
Page 363 and 364: To summarize the analysis, the busi
Page 365 and 366: Capacity costs are probably the mos
Page 367 and 368: which it was, but for the inventory
Page 369 and 370: They called this strategic cost man
Page 371 and 372: A closer study, however, revealed s
Page 373 and 374: the benefits of business planning.
Page 375 and 376: The last type of plan is called a d
Page 377 and 378: The Business Plan We will progress
Page 379 and 380: Hook the Reader That means having t
Page 381 and 382: Industry The goal of this section i
Page 383 and 384: upscale suburban client who wants p
Page 385 and 386: Company and Product Description Com
Page 387 and 388: Exhibit 14.8 shows the competitive
Page 389 and 390: Exhibit 14.9a Advertising schedule.
Page 391 and 392: Scope of Operations What is the pro
Page 393 and 394: Development Time Line A development
Page 395 and 396: By law, most organization types req
Page 397 and 398: As mentioned in the development pla
Page 399 and 400: that can be depreciated, you should
Page 401: 1 Special thanks to Matt Feczko, Mi
Page 406 and 407: In recent years there has been revo
Page 408 and 409: Experts are still divided over what
Page 410 and 411: low a price. By the time it found t
Page 412 and 413: At this point, in September 1998, a
Page 414 and 415: The lesson from these case studies
Page 416 and 417: for the machinery you bought. You v
Page 418 and 419: Upon expiration, the futures contra
Page 420 and 421: holding the underlying spot instrum
Page 422 and 423: A call option is an asset that give
Page 424 and 425: emain low, below the strike price,
Page 426 and 427: executives who became fabulously we
Page 428 and 429: A Protective Put Strategy A put opt
Page 430 and 431: Interest Rate Swaps The most common
Page 432 and 433: debt, but might help a pension fund
Page 434 and 435: tolerate a 10% rise in copper price
Page 438 and 439: It has been said that estimating th
Page 440 and 441: An Overview of the Business Valuati
Page 442 and 443: Acme has had research and developme
Page 444 and 445: Income Statement Analysis Victoria
Page 446 and 447: Acme reported consistent profitabil
Page 448 and 449: The purpose of this part of Victori
Page 450 and 451: 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),
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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
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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
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through interconnected networks. Th
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However, the customer relinquishes
Page 578 and 579:
The following scenario depicts what
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Field names are shown with syntax o
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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
Page 594 and 595:
Unless you picked up this book at t
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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
Page 608 and 609:
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
Page 614:
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
Page 625 and 626:
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,
Page 653 and 654:
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
Page 661 and 662:
Discontinued operations note Discou
Page 663 and 664:
Domain name servers (DNS) Domestic
Page 665 and 666:
uy-sell agreements family limited p
Page 667 and 668:
Financial advisor position Financia
Page 669 and 670:
Forecasting Forecasts Forecasts and
Page 671 and 672:
Gain vs. loss Gantt chart Gap analy
Page 673 and 674:
central processing unit (CPU) hard
Page 675 and 676:
Independent CPA Index of Economic F
Page 677 and 678:
estatements of previously published
Page 679 and 680:
Irregular cash flow IRS Form 1040 S
Page 681 and 682:
control conversion to formation, of
Page 683 and 684:
hardware software Margin analysis M
Page 685 and 686:
Microsoft Outlook Microsoft PowerPo
Page 687 and 688:
associations careers in finance e-c
Page 689 and 690:
Objectives Object-oriented programm
Page 691 and 692:
Other income (expense) note Out-of-
Page 693 and 694:
Payback period Payment card industr
Page 695 and 696:
Pooling of interest method Porter
Page 697 and 698:
Private wealth management Privilege
Page 699 and 700:
Quantify the material Quantity vari
Page 701 and 702:
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
Page 709 and 710:
Takeovers Tangible goals Target Tar
Page 711 and 712:
Tax savings Tax shelters Tax shield
Page 713 and 714:
centralized resource allocation fin
Page 715 and 716:
private wealth management. venture
Page 717:
World Factbook (CIA) World Wide Web
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