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Book Details
Abstract
In this new and fully updated Eighth Edition, the core concepts and topics of corporate finance are introduced in an approachable, user-friendly style. Key principles and mathematical techniques needed for a career in business are clearly explained step-by-step and are put into practice through numerous examples and vignettes which take a closer look at real-world and well-known companies.
What’s new?
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Chapter vignettes are refreshed and the accompanying questions are updated, with the aim of deepening student's knowledge of key contemporary issues
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Up-to-date with the latest changes in regulations and taxation, such as the UK tax treatment of dividends
Denzil Watson is a Principal Lecturer and Antony Head is an Associate Lecturer in the Sheffield Business School at Sheffield Hallam University. They have extensive experience of teaching corporate finance, managerial finance and strategic financial management over many years and in a wide range of courses at undergraduate, postgraduate and professional level.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Front Cover | Front Cover | ||
| Half-Title Page | i | ||
| Title Page | iii | ||
| Copyright Page | iv | ||
| About the Authors | v | ||
| Contents | vii | ||
| Preface | xiii | ||
| Acknowledgements | xv | ||
| 1 The finance function | 1 | ||
| Learning objectives | 1 | ||
| Introduction | 2 | ||
| 1.1 Two key concepts in corporate finance | 2 | ||
| 1.2 The role of the financial manager | 5 | ||
| 1.3 Corporate objectives | 8 | ||
| 1.4 How is shareholder wealth maximised? | 11 | ||
| 1.5 Agency theory | 13 | ||
| 1.6 Corporate governance | 20 | ||
| 1.7 Conclusion | 26 | ||
| Key points | 29 | ||
| Self-test questions | 31 | ||
| Questions for review | 32 | ||
| Questions for discussion | 33 | ||
| References | 33 | ||
| Recommended reading | 34 | ||
| 2 Capital markets, market efficiency and ratio analysis | 35 | ||
| Learning objectives | 35 | ||
| Introduction | 36 | ||
| 2.1 Sources of business finance | 36 | ||
| 2.2 Capital markets | 39 | ||
| 2.3 Capital market efficiency | 41 | ||
| 2.4 Assessing financial performance | 49 | ||
| 2.5 Conclusion | 68 | ||
| Key points | 68 | ||
| Self-test questions | 70 | ||
| Questions for review | 71 | ||
| Questions for discussion | 72 | ||
| References | 74 | ||
| Recommended reading | 76 | ||
| 3 Short-term finance and working capital management | 77 | ||
| Learning objectives | 77 | ||
| Introduction | 78 | ||
| 3.1 The objectives of working capital management | 78 | ||
| 3.2 Working capital policies | 78 | ||
| 3.3 Working capital and the cash conversion cycle | 82 | ||
| 3.4 Overtrading | 85 | ||
| 3.5 Managing inventory | 86 | ||
| 3.6 Managing cash | 91 | ||
| 3.7 Managing trade receivables | 94 | ||
| 3.8 Conclusion | 100 | ||
| Key points | 100 | ||
| Self-test questions | 101 | ||
| Questions for review | 102 | ||
| Questions for discussion | 103 | ||
| References | 105 | ||
| Recommended reading | 105 | ||
| 4 Long-term finance: equity finance | 106 | ||
| Learning objectives | 106 | ||
| Introduction | 107 | ||
| 4.1 Equity finance | 107 | ||
| 4.2 The Stock Exchange | 109 | ||
| 4.3 Rights issues | 114 | ||
| 4.4 Scrip issues, share splits, scrip dividends and share repurchases | 120 | ||
| 4.5 Preference shares | 125 | ||
| 4.6 Conclusion | 128 | ||
| Key points | 128 | ||
| Self-test questions | 130 | ||
| Questions for review | 131 | ||
| Questions for discussion | 132 | ||
| References | 133 | ||
| Recommended reading | 133 | ||
| 5 Long-term finance: debt finance, hybrid finance and leasing | 135 | ||
| Learning objectives | 135 | ||
| Introduction | 136 | ||
| 5.1 Bonds, loan notes, loan stock and debentures | 136 | ||
| 5.2 Bank and institutional debt | 143 | ||
| 5.3 International debt finance | 145 | ||
| 5.4 Convertible bonds | 145 | ||
| 5.5 Warrants | 149 | ||
| 5.6 Valuing fixed interest bonds | 150 | ||
| 5.7 Valuing convertible bonds | 152 | ||
| 5.8 Leasing | 154 | ||
| 5.9 Evaluating the financial effects of financing choices | 159 | ||
| 5.10 Conclusion | 161 | ||
| Key points | 161 | ||
| Self-test questions | 163 | ||
| Questions for review | 164 | ||
| Questions for discussion | 165 | ||
| References | 166 | ||
| Recommended reading | 166 | ||
| 6 An overview of investment appraisal methods | 168 | ||
| Learning objectives | 168 | ||
| Introduction | 169 | ||
| 6.1 The payback method | 169 | ||
| 6.2 The return on capital employed method | 171 | ||
| 6.3 The net present value method | 174 | ||
| 6.4 The internal rate of return method | 177 | ||
| 6.5 Comparing the NPV and IRR methods | 181 | ||
| 6.6 The profitability index and capital rationing | 185 | ||
| 6.7 The discounted payback method | 192 | ||
| 6.8 Conclusion | 192 | ||
| Key points | 192 | ||
| Self-test questions | 194 | ||
| Questions for review | 195 | ||
| Questions for discussion | 196 | ||
| References | 198 | ||
| Recommended reading | 198 | ||
| 7 Investment appraisal: applications and risk | 199 | ||
| Learning objectives | 199 | ||
| Introduction | 200 | ||
| 7.1 Relevant project cash flows | 200 | ||
| 7.2 Taxation and capital investment decisions | 202 | ||
| 7.3 Inflation and capital investment decisions | 207 | ||
| 7.4 Investment appraisal and risk | 210 | ||
| 7.5 Appraisal of foreign direct investment | 217 | ||
| 7.6 Empirical investigations of investment appraisal | 223 | ||
| 7.7 Conclusion | 226 | ||
| Key points | 226 | ||
| Self-test questions | 227 | ||
| Questions for review | 228 | ||
| Questions for discussion | 230 | ||
| References | 233 | ||
| Recommended reading | 234 | ||
| 8 Portfolio theory and the capital asset pricing model | 235 | ||
| Learning objectives | 235 | ||
| Introduction | 236 | ||
| 8.1 The measurement of risk | 236 | ||
| 8.2 The concept of diversification | 239 | ||
| 8.3 Investor attitudes to risk | 245 | ||
| 8.4 Markowitz’s portfolio theory | 247 | ||
| 8.5 Introduction to the capital asset pricing model | 252 | ||
| 8.6 Using the CAPM to value shares | 253 | ||
| 8.7 Empirical tests of the CAPM | 263 | ||
| 8.8 Conclusion | 265 | ||
| Key points | 266 | ||
| Self-test questions | 267 | ||
| Questions for review | 267 | ||
| Questions for discussion | 269 | ||
| References | 270 | ||
| Recommended reading | 271 | ||
| 9 The cost of capital and capital structure | 273 | ||
| Learning objectives | 273 | ||
| Introduction | 274 | ||
| 9.1 Calculating the cost of individual sources of finance | 274 | ||
| 9.2 Calculating the weighted average cost of capital | 278 | ||
| 9.3 Average and marginal cost of capital | 281 | ||
| 9.4 The CAPM and investment appraisal | 282 | ||
| 9.5 Practical problems with calculating WACC | 289 | ||
| 9.6 WACC in the real world | 291 | ||
| 9.7 The cost of capital for foreign direct investment | 293 | ||
| 9.8 Gearing: its measurement and significance | 295 | ||
| 9.9 The concept of an optimal capital structure | 299 | ||
| 9.10 The traditional approach to capital structure | 301 | ||
| 9.11 Miller and Modigliani (I): net income approach | 302 | ||
| 9.12 Miller and Modigliani (II): corporate tax | 305 | ||
| 9.13 Market imperfections | 305 | ||
| 9.14 Miller and personal taxation | 308 | ||
| 9.15 Pecking order theory | 308 | ||
| 9.16 Conclusion: does an optimal capital structure exist? | 310 | ||
| Key points | 311 | ||
| Self-test questions | 313 | ||
| Questions for review | 314 | ||
| Questions for discussion | 315 | ||
| References | 317 | ||
| Recommended reading | 318 | ||
| 10 Dividend policy | 320 | ||
| Learning objectives | 320 | ||
| Introduction | 321 | ||
| 10.1 Dividends: operational and practical issues | 321 | ||
| 10.2 The effect of dividends on shareholder wealth | 324 | ||
| 10.3 Dividend irrelevance | 324 | ||
| 10.4 Dividend relevance | 326 | ||
| 10.5 Dividend relevance or irrelevance? | 330 | ||
| 10.6 Dividend policies | 331 | ||
| 10.7 Alternatives to cash dividends | 336 | ||
| 10.8 Empirical evidence on dividend policy | 342 | ||
| 10.9 Conclusion | 344 | ||
| Key points | 345 | ||
| Self-test questions | 346 | ||
| Questions for review | 347 | ||
| Questions for discussion | 348 | ||
| References | 350 | ||
| Recommended reading | 351 | ||
| 11 Mergers and takeovers | 352 | ||
| Learning objectives | 352 | ||
| Introduction | 353 | ||
| 11.1 The terminology of mergers and takeovers | 353 | ||
| 11.2 Justifications for acquisitions | 354 | ||
| 11.3 Trends in takeover activity | 359 | ||
| 11.4 Target company valuation | 363 | ||
| 11.5 The financing of acquisitions | 370 | ||
| 11.6 Strategic and tactical issues | 375 | ||
| 11.7 Divestment | 383 | ||
| 11.8 Private equity | 389 | ||
| 11.9 Empirical research on acquisitions | 392 | ||
| 11.10 Conclusion | 395 | ||
| Key points | 396 | ||
| Self-test questions | 397 | ||
| Questions for review | 397 | ||
| Questions for discussion | 399 | ||
| References | 403 | ||
| Recommended reading | 404 | ||
| 12 Risk management | 405 | ||
| Learning objectives | 405 | ||
| Introduction | 406 | ||
| 12.1 Interest and exchange rate risk | 406 | ||
| 12.2 Internal risk management | 414 | ||
| 12.3 External risk management | 416 | ||
| 12.4 Futures contracts | 418 | ||
| 12.5 Options | 421 | ||
| 12.6 Swaps | 427 | ||
| 12.7 Issues in interest and exchange risk management | 432 | ||
| 12.8 Political risk | 441 | ||
| 12.9 Conclusion | 443 | ||
| Key points | 443 | ||
| Self-test questions | 445 | ||
| Questions for review | 446 | ||
| Questions for discussion | 447 | ||
| References | 448 | ||
| Recommended reading | 449 | ||
| Answers to self-test questions | 451 | ||
| Glossary | 470 | ||
| Present value tables | 479 | ||
| Index | 481 | ||
| Back Cover | Front Cover |