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SUMMARY OF whole Fundamentals of Corporate Finance By Ross and Westerfield and Jordan (10th Edition)USE LIFE LONG FOR FINANCE SECTOR JOBS TEACHING LEARNING EARNING ONLINE $4.39
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  3. Vrije Universiteit Amsterdam (VU)
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SUMMARY OF whole Fundamentals of Corporate Finance By Ross and Westerfield and Jordan (10th Edition)USE LIFE LONG FOR FINANCE SECTOR JOBS TEACHING LEARNING EARNING ONLINE

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  • Course
  • Advanced Corporate Financial Management (EC2PCF)
  • Institution
  • Vrije Universiteit Amsterdam (VU)
  • Book
  • ISE Fundamentals of Corporate Finance

THE ONLY SUMMARY YOU WILL HAVE SEEN THAT ACTUALLY COVERS THE WHOLE BOOK! ALL THE OTHERS SEEM TO STOP AT CHAP 14, BUT YOUR CLASS GOES OVER THE ENTIRE BOOK SO THIS IS SUPER HELPFUL!! Good stuffs, complete summary of the whole book. READ THE INTRODUCTION BELOW : INTRODUCTION Corporate finan...

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  • May 1, 2022
  • 184
  • 2021/2022
  • Summary

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  • corporate finance
  • financial management
  • acfm
  • npv
  • bond
  • advanced corporate financial management

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lOMoARcPSD|10422409




Summary
Fundamentals of Corporate
Finance




Stephen Ross, Randolph Westerfield,
Bradford Jordan
10th Edition

, lOMoARcPSD|10422409




Contents

1. Introduction to corporate finance..........................................................................................6
1.1..................................................Corporate finance and the financial manager 6
1.2........................................................................Forms of business organization 7
1.3...................................................................The goal of financial management 8
1.4.........................................The agency problem and control of the corporation 9
1.5.............................................................Financial markets and the corporation 10
2. Financial statements, taxes, and cash flow......................................................................11
2.1............................................................................................ The balance sheet 11
2.2...................................................................................... The income statement 12
2.3................................................................................................................ Taxes 13
2.4.......................................................................................................... Cash flow 13
3. Working with financial statements......................................................................................15
3.1............................................Cash flow and financial statements: a closer look 15
3.2...................................................................Standardized financial statements 16
3.3................................................................................................... Ratio analysis 16
3.4.The DuPont identity.....................................................................................................20
3.5..............................................................Using financial statement information 20
4. Long-term financial planning and growth.........................................................................21
4.1............................................................................... What is financial planning? 21
4.2.............................................................Financial planning models: a first look 21
4.3...................................................................The percentage of sales approach 22
4.4..........................................................................External financing and growth 23
4.5.........................................Some caveats regarding financial planning models 24
5. Introduction to valuation: the time value of money......................................................25
5.1........................................................................Future value and compounding 25
5.2.........................................................................Present value and discounting 25
5.3.............................................................More about present and future values 26
6. Discounted cash flow valuation............................................................................................28
6.1............................................Future and present values of multiple cash flows 28
6.2........................................Valuing level cash flows: annuities and perpetuities 29
6.3...................................................Comparing rates: the effect of compounding 30
6.4....................................................................Loan types and loan amortization 30
7. Interest rates and bond valuation........................................................................................32



1
7.1................................................................................Bonds and bond valuation 32

, lOMoARcPSD|10422409




7.2................................................................................ More about bond features 33
7.3..................................................................................................... Bond ratings 34
7.4.Some different types of bonds.................................................................................35
7.5................................................................................................... Bond markets 35
7.6...............................................................................Inflation and interest rates 35
7.7.Determinants of bond yields....................................................................................36
8. Stock valuation...........................................................................................................................38
8.1.................................................................................. Common stock valuation 38
8.2..............................................Some features of common and preferred stocks 39
8.3............................................................................................ The stock markets 40
9. Net present value and other investment criteria...........................................................42
9.1............................................................................................. Net present value 42
9.2.............................................................................................. The payback rule 42
9.3................................................................................... The discounted payback 43
9.4........................................................................The average accounting return 43
9.5................................................................................The internal rate of return 44
9.6....................................................................................... The profitability index 45
9.7.....................................................................The practice of capital budgeting 45
10.Making capital investment decisions................................................................................46
10.1........................................................................Project cash flows: a first look 46
10.2................................................................................... Incremental cash flows 46
10.3..................................Pro forma financial statements and project cash flows 47
10.4........................................................................More about project cash flows 47
10.5................................................Alternative definitions of operating cash flow 48
10.6....................................Some special cases of discounted cash flow analysis 48
11.Project analysis and evaluation..........................................................................................50
11.1............................................................................... Evaluating NPV estimates 50
11.2..............................................................Scenario and other what-if analyses 50
11.3....................................................................................... Break-even analysis 51
11.4......................................Operating cash flow, sales volume, and break-even 52
11.5......................................................................................... Operating leverage 53
11.6............................................................................................. Capital rationing 53
12.Some lessons from capital market history.....................................................................55
12.1........................................................................................................... Returns 55



2
12.2....................................................................................... The historical record 55
12.3....................................................................Average returns: the first lesson 56

, lOMoARcPSD|10422409




12.4.................................................THe variability of returns: the second lesson 56
12.5...........................................................................More about average returns 57
12.6................................................................................ Capital market efficiency 58
13.Return, risk, and the security market line......................................................................60
13.1.....................................................................Expected returns and variances 60
13.2........................................................................................................ Portfolios 61
13.3.........................................Announcements, surprises, and expected returns 61
13.4................................................................Risk: systematic and unsystematic 61
13.5.....................................................................Diversification and portfolio risk 62
13.6................................................................................Systematic risk and beta 62
13.7.................................................................................The security market line 62
13.8....................................................The SML and the cost of capital: a preview 63
14.Cost of capital.....................................................................................................................65
14.1..........................................................The cost of capital: some preliminaries 65
14.2......................................................................................... The cost of equity 65
14.3............................................................The costs of debt and preferred stock 67
14.4.............................................................The weighted average cost of capital 67
14.5............................................................Divisional and project costs of capital 68
14.6...............................Flotation costs and the weighted average cost of capital 68
15.Raising capital..........................................................................................................................70
15.1..The financing life cycle of a firm: early-stage financing and venture capital 70
15.2......................................Selling securities to the public: the basic procedure 70
15.3.............................................................................. Alternative issue methods 71
15.4................................................................................................... Underwriters 71
15.5.................................................................................... IPOs and underpricing 72
15.6....................................................New equity sales and the value of the firm 73
15.7........................................................................The costs of issuing securities 73
15.8............................................................................................................. Rights 74
15.9.......................................................................................................... Dilution 75
15.10.................................................................................Issuing long-term debt 75
15.11.......................................................................................... Shelf registration 76
16.Financial leverage and capital structure policy............................................................77
16.1........................................................................The capital structure question 77



3
16.2......................................................................The effect of financial leverage 78
16.3..............................................Capital structure and the cost of equity capital 78
16.4..............................................M&M propositions I and II with corporate taxes 79

, lOMoARcPSD|10422409




16.5............................................................................................ Bankruptcy costs 80
16.6................................................................................Optimal capital structure 80
16.7.................................................................................................. The pie again 81
16.8...............................................................................The pecking-order theory 81
16.9...........................................................................Observed capital structures 82
16.10........................................................A quick look at the bankruptcy process 82
17.Dividends and payout policy...............................................................................................84
17.1...........................................................Cash dividends and dividend payment 84
17.2.........................................................................Does dividend policy matter? 85
17.3.........................................Real-world factors favoring a low dividend payout 85
17.4.......................................Real-world factors favoring a high dividend payout 86
17.5..................................................................A resolution of real-world factors? 86
17.6.....................................Stock repurchases: an alternative to cash dividends 87
17.7............What we know and do not know about dividend and payout policies 87
17.8.....................................................................Stock dividends and stock splits 88
18.Short-term finance and planning.......................................................................................90
18.1.............................................................Tracing cash and net working capital 90
18.2.........................................................The operating cycle and the cash cycle 91
18.3...................................................Some aspects of short-term financial policy 92
18.4............................................................................................. The cash budget 93
18.5..................................................................................... Short-term borrowing 93
18.6...........................................................................A short-term financial plan 94
19.Cash and liquidity management........................................................................................95
19.1................................................................................ Reasons for holding cash 95
19.2........................................................................................ Understanding float 96
19.3..................................................................Cash collection and concentration 97
19.4.......................................................................Managing cash disbursements 97
19.5.......................................................................................... Investing idle cash 98
20.Credit and inventory management...................................................................................99
20.1....................................................................................Credit and receivables 99
20.2.......................................................................................... Terms of the sales 100
20.3...................................................................................Analysing credit policy 100



4
20.4..................................................................................... Optimal credit policy 101
20.5................................................................................................ Credit analysis 102
20.6............................................................................................ Collection policy 102
20.7..................................................................................Inventory management 103

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20.8................................................................Inventory management techniques 104
21.International corporate finance........................................................................................105
21.1................................................................................................... Terminology 105
21.2.............................................Foreign exchange markets and exchange rates 106
21.3................................................................................. Purchasing power parity 106
21.4.Interest rate parity, unbiased forward rates, and the international Fisher effect
107
21.5......................................................................International capital budgeting 108
21.6.......................................................................................... Exchange rate risk 109
21.7.................................................................................................... Political risk 109




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