Table of Contents

Introduction: Contrasts, Shocks, Threats and Opportunities viii Preface xiv Frequently used symbols xviii 1 WHAT IS CORPORATE FINANCE? 1 SECTION I FINANCIAL ANALYSIS 15 PART ONE FUNDAMENTAL CONCEPTS IN FINANCIAL ANALYSIS 17 2 CASH FLOW 19 3 EARNINGS 29 4 CAPITAL EMPLOYED AND INVESTED CAPITAL 45 5 WALKING THROUGH FROM EARNINGS TO CASH FLOW 58 6 GETTING TO GRIPS WITH CONSOLIDATED ACCOUNTS 73 7 HOW TO COPE WITH THE MOST COMPLEX POINTS IN FINANCIAL ACCOUNTS 92 PART TWO FINANCIAL ANALYSIS AND FORECASTING 119 8 HOW TO PERFORM A FINANCIAL ANALYSIS 121 9 MARGIN ANALYSIS: STRUCTURE 154 10 MARGIN ANALYSIS: RISKS 176 11 WORKING CAPITAL AND CAPITAL EXPENDITURES 191 12 FINANCING 213 13 RETURN ON CAPITAL EMPLOYED AND RETURN ON EQUITY 227 14 CONCLUSION OF FINANCIAL ANALYSIS 246 SECTION II INVESTORS AND MARKETS 253 PART ONE INVESTMENT DECISION RULES 255 15 THE FINANCIAL MARKETS 257 16 THE TIME VALUE OF MONEY AND NET PRESENT VALUE 278 17 THE INTERNAL RATE OF RETURN 295 PART TWO THE RISK OF SECURITIES AND THE REQUIRED RATE OF RETURN 313 18 RISK AND RETURN 315 19 THE REQUIRED RATE OF RETURN 347 20 THE TERM STRUCTURE OF INTEREST RATES 366 PART THREE FINANCIAL SECURITIES 377 21 BONDS 379 22 OTHER DEBT PRODUCTS 407 23 SHARES 418 24 OPTIONS 439 25 HYBRID SECURITIES 460 26 SELLING SECURITIES 481 SECTION III VALUE 511 27 VALUE AND CORPORATE FINANCE 513 28 MEASURING VALUE CREATION 532 29 INVESTMENT CRITERIA 551 30 THE COST OF CAPITAL 569 31 RISK AND INVESTMENT ANALYSIS 587 32 VALUATION TECHNIQUES 602 SECTION IV CORPORATE FINANCIAL POLICIES 633 PART ONE CAPITAL STRUCTURE POLICIES 635 33 CAPITAL STRUCTURE AND THE THEORY OF PERFECT CAPITAL MARKETS 637 34 CAPITAL STRUCTURE, TAXES AND ORGANISATION THEORIES 649 35 DEBT, EQUITY AND OPTIONS THEORY 670 36 WORKING OUT DETAILS: THE DESIGN OF THE CAPITAL STRUCTURE 689 PART TWO EQUITY CAPITAL 721 37 RETURNING CASH TO SHAREHOLDERS 723 38 DISTRIBUTION IN PRACTICE: DIVIDENDS AND SHARE BUY-BACKS 740 39 SHARE ISSUES 758 SECTION V FINANCIAL MANAGEMENT 773 PART ONE CORPORATE GOVERNANCE AND FINANCIAL ENGINEERING 775 40 CHOICE OF CORPORATE STRUCTURE 777 41 INITIAL PUBLIC OFFERINGS (IPOS) 798 42 CORPORATE GOVERNANCE 809 43 TAKING CONTROL OF A COMPANY 822 44 MERGERS AND DEMERGERS 844 45 LEVERAGED BUYOUTS (LBOS) 861 46 BANKRUPTCY AND RESTRUCTURING 876 PART TWO MANAGING CASH FLOWS, WORKING CAPITAL AND FINANCIAL RISKS 889 47 MANAGING CASH FLOWS 891 48 MANAGING WORKING CAPITAL 910 49 MANAGING FINANCIAL RISKS 922 Epilogue-Finance and Strategy 949 Top 20 Largest Listed Companies 957 Contents 965 Index 973