Glen Arnold, Salford University

Publisher: Financial Times Press
Copyright: 2005
Format: Paper; 736 pp

ISBN-10:	0273688510
ISBN-13:	9780273688518

Our Price: £37.99
Status: Instock
Published: 25 Nov 2004

Corporate finance touches every aspect of your business: from deciding which capital expenditure projects are worthy of backing for tomorrow, to the immediate and daily challenge of managing business units for shareholder value. If finance is the framework for corporate decisions and the language of corporate decision-makers, then fluency in finance will serve you and your business well.  The Handbook of Corporate Finance is here to help you to understand and apply the essentials of corporate finance with speed and confidence

The book will be structured around the four key financial issues facing management:

• In what projects are we going to invest our shareholders money (capex)?

• How do we create and measure shareholder value creation?

• What type of finance should we raise?

• How do we manage financial risk?

Contents

Introduction

• Overview of the book

• Enthusiasm for financial knowledge

• The four key issues

• Outline

Chapter 1. What are we aiming at?

• The objective of the firm

• Variety of objectives: those admitted to (and those kept quiet)

• Why should we aim for shareholder wealth?

• What is shareholder wealth?

• Profit maximisation is not the same as shareholder wealth maximisation

• Getting manager¿s objectives aligned with shareholder¿s objectives

PART 1 ¿ WHAT INVESTMENTS SHOULD WE MAKE?

Chapter 2. State-of-the-art project assessment techniques

• How do you know whether an investment generates value for shareholders?

• Time is money

• Discounted cash flow

• State-of-the-art technique 1: net present value

• State-of-the-art technique 2: internal rate of return

• So which is better: NPV or IRR?

Appendix 2.1 Mathematical tools for finance

Simple and compound interest

Present value

Determining the interest rate

The investment period

Annuities

Perpetuities

Chapter 3. Traditional appraisal techniques

• What businesses actually use

• Payback

• Accounting rate of return

• Why internal rate of return is still popular

Chapter 4. Investment decision-making in real organisations

• The managerial art of investment selection

  • Strategy

• Social context

• Expense

• Stifling the entrepreneurial spirit

• Intangible benefits

• The stages of investment decisions

  • Generation of ideas

  • Development and classification

  • Screening

  • Appraisal

  • Report and authorisation

  • Implementation

  • Post completion audit

Chapter 5. Allowing for risk

• What is risk?

• Adjusting for risk through the discount rate

• Sensitivity analysis

• Scenario analysis

• Probability analysis

• Standard deviation

• What risk techniques do managers actually use?

PART 2 SHAREHOLDER VALUE

Chapter 6. Value managed companies versus earnings managed companies

• The pervasiveness of the value approach

• Case studies: FT100 companies creating value and destroying value

• Why shareholder value?

• Earnings-based management¿s failings:

  • Dicey accounting

  • Throwing money in

  • Ignoring the time value of money

  • Ignoring risk

• ROCE has limitations

• Focusing on earnings is not the same as value

• How a business creates value

• The five actions to create value

Chapter 7. Strategic position

• Strategic business unit management

• Do we have any strong business franchises?

• Industry attractiveness

• The strength of our resources

• The TRRACK system

• The life cycle of value potential

• Strategic choice

• What use is the head office?

Chapter 8. Value creation within strategic business units

• Using cash flow to measure value

• Shareholder value analysis

• Economic profit

• Economic value added (EVA)

Chapter 9. Value measures for the entire firm

• Total shareholder return

• Wealth added index

• Market value index

• Market to book ratio

Chapter 10. What is the company¿s cost of capital?

• The required rate of return

• The cost of equity capital

  • The capital asset pricing model

  • Gordon growth model

  • The cost of retained earnings

• Debt capital

• Preference shares

• The weighted average cost of capital, WACC

• What the WACC tells you

• Applying WACC to strategic business units and projects

• What do managers actually do?

• Implementation issues

  • How large is the equity premium?

  • Which risk free rate?

  • How reliable are the CAPM and beta?

• Fundamental beta

Chapter 11. Mergers: impulse, regret and success

• The merger decision

• You say merger, I say acquisition

• Types of merger

• Merger statistics

• What drives firms to merge?

  • Synergy

  • Market power

  • Economies of scale

  • Internalisation of transactions

  • Entering new markets and industries

  • Tax

  • Risk diversification

  • Bargain buying

  • Inefficient management

  • Managerial benefits

  • Hubris

  • Survival

  • Free cash flow

  • Third party motives

• Do the shareholders of acquiring firms gain from mergers?

• Managing mergers

• The three stages of a merger

• Problem areas in merger management

• Why do mergers fail to generate value for acquiring shareholders?

Chapter 12. The merger process

• The City code on takeovers and mergers

• Action before the bid

• The bid

• After the bid

• Defence tactics

• Paying for the targets shares: cash or shares?

Chapter 13. Valuing companies

• The two skills

• Valuation using net asset value

• Dividend valuation methods

• How do you estimate future growth?

• Price-earnings ratio methods

• Valuation using cash flow

• Owner earnings method

• Valuing unquoted shares

• Unusual companies

• Managerial control changes the valuation

Chapter 14. What pay-outs should we make to shareholders?

·         Value-based management is increasingly talked about but little understood. This book provides a through grounding.

·         Mergers and the problem of merger failure (i.e. acquiring shareholders losing out) is discussed along with remedies

·         The proper use of derivatives as tools helping the business control risk, rather than increase it, is explained in easy to follow and practically-oriented fashion.

·         Modern investment appraisal techniques are contrasted with the rules of thumb frequently employed.

• An overview of modern financial markets and instruments with insight into the benefits brought by effective exploitation of the markets and perils of ignoring the needs of the finance providers is displayed.