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ISE Analysis for Financial Management



ISE Analysis for Financial Management PDF

Author: Robert C. Higgins Professor and Jennifer Koski

Publisher: McGraw Hill

Genres:

Publish Date: March 18, 2022

ISBN-10: 1265042632

Pages: 464

File Type: PDF

Language: English

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Book Preface

Like its predecessors, the thirteenth edition of Analysis for Financial Management is for nonfinancial executives and business students interested in the practice of financial management. It introduces standard techniques and recent advances in a practical, intuitive way. The book assumes no prior background beyond a rudimentary and perhaps rusty familiarity with financial statements—although a healthy curiosity about what makes business tick is also useful. Emphasis throughout is on the managerial implications of financial analysis.

Analysis for Financial Management should prove valuable to individuals interested in sharpening their managerial skills and to executive program partic-ipants. The book has also found a home in university classrooms as the sole text in Executive MBA and applied finance courses, as a companion text in case-oriented courses, and as supplementary reading in more theoretical courses.

Analysis for Financial Management is our attempt to translate into another medium the enjoyment and stimulation we have received over many years working with executives and college students. This experience has convinced us that financial techniques and concepts need not be abstract or obtuse; that significant advances in the field, such as agency theory, market signaling, market efficiency, capital asset pricing, and real options analysis, are impor-tant to practitioners; and that finance has much to say about the broader aspects of company management. We are also convinced that any activity in which so much money changes hands so quickly cannot fail to be interesting.

Part One looks at the management of existing resources, including the use of financial statements and ratio analysis to assess a company’s financial health, its strengths, weaknesses, recent performance, and future prospects. Emphasis throughout is on the ties between a company’s operating activities and its finan-cial performance. A recurring theme is that a business must be viewed as an integrated whole and that effective financial management is possible only within the context of a company’s broader operating characteristics and strategies.

The rest of the book deals with the acquisition and management of new resources. Part Two examines financial forecasting and planning, with par-ticular emphasis on managing growth and decline. Part Three considers the financing of company operations, including a review of the principal security types, the markets in which they trade, and the proper choice of security type by the issuing company. The latter requires a close look at financial leverage and its effects on the firm and its shareholders.
Part Four addresses the use of discounted cash flow techniques, such as the net present value and the internal rate of return, to evaluate investment opportunities. It also deals with the difficult task of incorporating risk into investment appraisal. The book concludes with an examination of business valuation and company restructuring within the context of the ongoing debate over the proper roles of shareholders, boards of directors, and incumbent managers in governing America’s public corporations.
An extensive glossary of financial terms and suggested answers to odd-numbered, end-of-chapter problems follow the last chapter.

Changes in the Thirteenth Edition

Noteworthy changes and refinements in the thirteenth edition include:

∙ Updated discussions of adjusted earnings and International Financial Reporting Standards in Chapter 1.
∙ Application in Chapter 3 of Argo, a new, free Excel add-in for implementing simulation analyses to financial forecasting.
∙ Inclusion of a discussion of Special Purpose Acquisition Companies (SPACs) in Chapter 5, in the context of trends in raising capital.
∙ Expanded discussion of the underinvestment problem for corporate invest-ments and its consequences for the capital structure decision in Chapter 6.
∙ Updated discussions of tax inversions, EPS dilution, and research on merger performance in Chapter 9.
∙ Use of Polaris, Inc., a leading producer of snowmobiles, all-terrain vehi-cles, motorcycles, and boats, as an extended example throughout the book. A word of caution: Analysis for Financial Management emphasizes the appli-cation and interpretation of analytic techniques in decision making. These tech-niques have proved useful for putting financial problems into perspective and for helping managers anticipate the consequences of their actions. However, tech-niques can never substitute for thought. Even with the best technique, it is still necessary to define and prioritize issues, to modify analysis to fit specific cir-cumstances, to strike the proper balance between quantitative analysis and more qualitative considerations, and to evaluate alternatives insightfully and creatively. Mastery of technique is only the necessary first step toward effective management.
The ability to access current Compustat data continues to be a great help in providing timely examples of current practice. We also owe a large thank you to the following people for their insightful reviews of the twelfth edition and their constructive advice. They did an excellent job. Any remaining short-comings are ours, not theirs.
Buleny Aybar, Southern New Hampshire University
Janet L. Bartholow, Limestone University
Dennis Burke, Coker University
Deanne Butchey, Florida International University

Brief Contents

Preface xii
PART ONE
Assessing the Financial
Health of the Firm 1

1
Interpreting Financial Statements 3
2
Evaluating Financial Performance 37
PART TWO
Planning Future Financial Performance 77
3
Financial Forecasting 79
4
Managing Growth 111
PART THREE
Financing Operations 139
5
Financial Instruments and Markets 141
6
The Financing Decision 193
PART FOUR
Evaluating Investment Opportunities 235
7
Discounted Cash Flow
Techniques 237

8
Risk Analysis in Investment
Decisions 285

9
Business Valuation and Corporate
Restructuring 335

GLOSSARY 385

SUGGESTED ANSWERS TO

ODD-NUMBERED

PROBLEMS 397

INDEX 4
29


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