Revised edition of the authors' Finance.

Includes index.

Preface ivAuthor Bios xiiPart 1 Institutions and Markets1 The Financial Environment 51.1 What is Finance? 61.2 Why Study Finance? 81.3 Six Principles of Finance 101.4 Overview of the Financial System 131.5 Financial Markets: Characteristics and Types 171.6 Careers in Finance 181.7 The Plan of Study 20Applying Finance To. . . 21Summary 21Key Terms 22Review Questions 22Exercises 222 Money and the Monetary System 242.1 The 2007-2008 Financial Crisis and Subsequent Recovery 252.2 Process of Moving Savings into Investments 262.3 Overview of the Monetary System 282.4 Characteristics and Functions of Money 292.5 Development of Money in the United States 312.6 Money Market Securities 372.7 Measures of the U.S. Money Supply 382.8 Money Supply and Economic Activity 412.9 International Monetary System 42Applying Finance To. . . 44Summary 44Key Terms 45Review Questions 45Exercises 46Problems 473 Banks and Other Financial Institutions 493.1 Financial Institution Problems During the 2007-2008 Financial Crisis 503.2 Types and Roles of Financial Institutions 513.3 Overview of the Banking System 553.4 Historical Development of the U.S. Banking System 583.5 Regulation of the Banking System 603.6 Structure of Banks 653.7 The Bank Balance Sheet 663.8 Bank Management 713.9 International Banking and Foreign Systems 75Applying Finance To. . . 76Summary 77Key Terms 78Review Questions 78Exercises 79Problems 794 Federal Reserve System 824.1 U.S. Central Bank Response to the Financial Crisis and Great Recession 834.2 The U.S. Banking System Prior to the Fed 844.3 Structure of the Federal Reserve System 864.4 Monetary Policy Functions and Instruments 924.5 Fed Supervisory and Regulatory Functions 994.6 Fed Service Functions 1014.7 Central Banks in Other Countries 103Applying Finance To. . . 104Summary 104Key Terms 105Review Questions 105Exercises 106Problems 1075 Policy Makers and the Money Supply 1095.1 National Economic Policy Objectives 1105.2 Four Policy Maker Groups 1125.3 Government Influence on the Economy 1145.4 Treasury Cash and General Management Responsibilities 1165.5 Treasury Deficit Financing and Debt Management Responsibilities 1205.6 Changing the Money Supply 1225.7 Factors Affecting Bank Reserves 1285.8 The Monetary Base and the Money Multiplier 131Applying Finance To. . . 133Summary 133Key Terms 134Review Questions 134Exercises 135Problems 1356 International Finance and Trade 1376.1 International Monetary System 1386.2 European Unification 1406.3 Currency Exchange Markets and Rates 1426.4 Factors that Affect Currency Exchange Rates 1456.5 Conducting Business Internationally 1496.6 Financing International Trade 1516.7 Developments in U.S. International Transactions 157Applying Finance To. . . 161Summary 161Key Terms 162Review Questions 162Exercises 163Problems 1646.8 Exchange Rate Risks in Global Business 166Hedging Cash Flows 167Speculating or Taking Educated Guesses on Exchange Rate Movements 168Where to Invest? 168Summary 169Review Questions 170Part 2 Investments7 Savings and Investment Process 1737.1 Gross Domestic Product and Capital Formation 1747.2 Federal Government Receipts and Expenditures 1777.3 Role and Major Sources of Savings 1807.4 Factors Affecting Savings 1847.5 Capital Market Securities 1877.6 Mortgage Markets 1897.7 Role of the Individual in the 2007-2008 Financial Crisis and Today 191Applying Finance To. . . 193Summary 193Key Terms 194Review Questions 194Exercises 195Problems 1958 Interest Rates 1978.1 Supply and Demand for Loanable Funds 1988.2 Components of Market Interest Rates 2038.3 Default Risk-Free Securities:8.4 Term or Maturity Structure of Interest Rates 2108.5 Inflation Premiums and Price Movements 2138.6 Default Risk Premiums 218Applying Finance To. . . 220Summary 220Key Terms 221Review Questions 221Exercises 222Problems 2239 Time Value of Money 2259.1 Basic Time Value Concepts 2269.2 Compounding to Determine Future Values 2289.3 Discounting to Determine Present Values 2329.4 Finding Interest Rates and Time Requirements 2379.5 Future Value of an Annuity 2399.6 Present Value of an Annuity 2429.7 Interest Rates and Time Requirements for Annuities 2459.8 Determining Periodic Annuity Payments 2479.9 More Frequent Time Intervals and the Cost of Consumer Credit 249Applying Finance To. . . 252Summary 253Key Terms 253Review Questions 254Exercises 254Problems 2549.10 Annuity Due Problems 257Future Value of an Annuity Due 257Present Value of an Annuity Due 258Interest Rates and Time Requirements for Annuity Due Problems 259Summary 260Questions and Problems 26010 Bonds and Stocks: Characteristics and Valuations 26210.1 Long-Term External Financing Sources for Businesses 26310.2 Bonds 26410.3 Different Types of Bonds 27110.4 Corporate Equity Capital 27510.5 Dividends and Stock Repurchases 27910.6 Valuation Principles 28310.7 Valuation of Bonds 28610.8 Valuation of Stocks 293Applying Finance To. . . 298Summary 298Key Terms 299Review Questions 300Problems 30110.9 Holding Period Returns 305Annualized Rates of Return 305Summary 307Problems 30711 Securities and Markets 30811.1 Issuing Securities: Primary Securities Markets 30911.2 The Facebook IPO 31311.3 Other Ways to Assist Issuing Firms 31611.4 Cost of Going Public 31811.5 Investment Banking Firms: Other Functions Innovations Regulations 32111.6 Trading Securities - Secondary Securities Markets 32311.7 Security Transactions 32611.8 Over-the-Counter Market 33011.9 What Makes a Good Market? 33111.10 Security Market Indexes and Trading Foreign Securities 33311.11 Inside Information and Other Ethical Issues 336Applying Finance To. . . 338Summary 339Key Terms 340Review Questions 341Problems 34111.12 Why Do Derivatives Exist? 344Futures Contracts 345Options 346Option Profit/Loss Diagrams 349Summary 350Key Terms 350Discussion Questions 350Problems 35112 Financial Return and Risk Concepts 35212.1 Historical Return for a Single Financial Asset 35312.2 Historical Risk Measures for a Single Financial Asset 35512.3 Where Does Risk Come from? 35812.4 Expected Measures of Return and Risk 36012.5 Historical Returns and Risk of Different Assets 36412.6 Efficient Capital Markets 36512.7 Portfolio Returns 36812.8 Variance and Standard Deviation of Return On a Portfolio 36912.9 Portfolio Risk and the Number of Investments in the Portfolio 37212.10 Capital Asset Pricing Model 374Applying Finance To. . . 378Summary 378Key Terms 379Review Questions 379Problems 38012.11A Estimating Beta 38412.11B Security Market Line 386Summary 387Problems 387Part 3 Financial Management13 Business Organization and Financial Data 39113.1 Starting a Business 39213.2 Forms of Business Organization in the United States 39413.3 Accounting Principles 39813.4 Income Statement 40113.5 The Balance Sheet 40213.6 Statement of Cash Flows 40513.7 Financial Statements of Different Companies 40713.8 Goal of a Firm 41013.9 Corporate Governance 41413.10 Finance in the Organization Chart 418Applying Finance To. . . 420Summary 420Key Terms 421Review Questions 421Problems 42213.11A Income Tax 42713.11B Depreciation Basics 42913.11.1 A Few Words on Depreciation Methods 430Summary 431Review Questions and Problems 43114 Financial Analysis and Long-Term Financial Planning 43214.1 Financial Statement Analysis 43314.2 Liquidity Ratios and Analysis 43614.3 Asset Management Ratios and Analysis 43814.4 Financial Leverage Ratios and Analysis 44114.5 Profitability Ratios and Analysis 44514.6 Market Value Ratios and Analysis 44714.7 Dupont Method of Ratio Analysis 44914.8 Long-Term Financial Planning 45214.9 Cost-Volume-Profit Analysis 45514.10 Degree of Operating Leverage 456Applying Finance To. . . 458Summary 459Key Terms 460Review Questions 460Problems 46115 Managing Working Capital 46615.1 Importance of Working Capital 46715.2 Operating and Cash Conversion Cycles 46815.3 Investments in Receivables Inventory and Payable Financing 47215.4 Cash Budgets 47515.5 Management of Current Assets 48015.6 Getting - and Keeping - the Cash 48815.7 Accounts Receivable Management 49015.8 Inventory Management 49415.9 Technology and Working Capital Management 495Applying Finance To. . . 497Summary 497Key Terms 498Review Questions 498Problems 49916 Short-Term Business Financing 50316.1 Strategies for Financing Working Capital 50416.2 Factors Affecting Short-Term Financing 50716.3 Providers of Short-Term Financing 51216.4 Nonbank Short-Term Financing Sources 51616.5 Additional Varieties of Short-Term Financing 52116.6 Inventory Financing and Other Secured Loans 52516.7 The Cost of Short-Term Financing 527Applying Finance To. . . 528Summary 528Key Terms 529Review Questions 530Problems 53017 Capital Budgeting Analysis 53317.1 Mission, Vision, and Capital Budgeting 53417.2 Capital Budgeting Process 53717.3 Capital Budgeting Techniques - Net Present Value 54017.4 Capital Budgeting Techniques - Internal Rate of Return 54317.5 Capital Budgeting Techniques - Modified Internal Rate of Return 54717.6 Capital Budgeting Techniques - Profitability Index 54917.7 Capital Budgeting Techniques - Payback Period 54917.8 Conflicts Between Discounted Cash Flow Techniques 55017.9 Estimating Project Cash Flows 55217.10 Keeping Managers Honest 55817.11 Risk-Related Considerations 559Applying Finance To. . . 561Summary 561Key Terms 563Review Questions 563Problems 56417.12 Project Stages and Cash Flow Estimation 567Initial Outlay 567Cash Flows During the Project's Operating Life 568Salvage Value and NWC Recovery at Project Termination 56817.13 Applications 569Cash Flow Estimation for a Revenue Expanding Project 569Cash Flow Estimation for a Cost-Saving Project 571Setting a Bid Price 574Summary 576Review Questions 576Problems 57618 Capital Structure and the Cost of Capital 57818.1 Why Choose a Capital Structure? 57918.2 Required Rate of Return and the Cost of Capital 58218.3 Cost of Capital 58318.4 Weighted Average Cost of Capital 58718.5 Planning Growth Rates 59218.6 EBIT/eps Analysis 59418.7 Combined Operating and Financial Leverage Effects 59718.8 Insights from Theory and Practice 601Applying Finance To. . . 607Summary 607Key Terms 608Review Questions 609Problems 610Appendix A-1Glossary G-1Index I-1

"Business managers will gain a basic understanding of the complex world of finance with Introduction to Finance: Markets, Investments, and Financial Management, 15th Edition. This text presents a balanced survey of the three main areas of finance: institutions and markets, investments, and financial management. The examples have been completely updated throughout to provide the most relevant information. Discussions of small business practice help them gain a better understanding of small business applications. More focus is placed on ethics to reflect the headlines in today's news. Additional end-of-chapter questions and career-profile features also enable business managers to connect the material to the real world"-- Provided by publisher.

College of Business and Accountancy Bachelor of Science in Business Administration major in Financial Management

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