Published: March 2021
Page Count: 372
ISBN (Digital): 978-1-4533-3789-9

Managerial Finance

Version 1.1
By Amy K. S. Scott and Bradley C. Barnhorst

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Homework

Manual

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Key Features

New in Version 1.1: Over 90 embedded videos recorded by author Brad Barnhorst provide context, explain concepts in further depth, and engage the students by dynamically connecting them to one of the book’s authors.
Prime areas of focus are practical applications and ethics. Relevant topics in finance are explained in a clear concise, applied manner to facilitate accessibility to non-finance majors, without sacrificing the depth necessary for finance majors.
Flexible structure facilitates use at different levels. An advanced course would likely utilize all the chapters, while a course for non-majors may only use some of the modules. Provides the necessary depth of knowledge without sacrificing breadth of coverage.
Encourages thinking about business problems from a financial perspective and by using an ethical stakeholder model.
Emphasizes practical, working knowledge by providing a multitude of concrete worked examples that demonstrate applicability across all business functions.
Step-by-step approach ensures theory discussions are supported by quantitative analysis.
Integrated discussions of technology enhance student learning through spreadsheet problems and recorded videos.
Ethical issues and real-world problems are woven throughout, so students can see the “bigger picture” implications of their decisions. An ethics feature appears in each chapter.

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Managerial Finance is suitable for managerial finance, financial management, or corporate finance courses taught at the undergraduate level in two- and four-year colleges and universities and at the graduate level.

Managerial Finance features an unusually robust integration of theory and practical application. Development of financial “intuition” and the ability to successfully apply learning to new situations is the primary goal of the book. Consequently, the learning strategy first encourages students to understand concepts before equations and discussion of operations are presented. To support the development of financial intuition, each core theoretical concept is supported by numerically based applications. All theory and application are presented in the context of decision making within an ethical stakeholder model.

This textbook models and employs a discounted cash flow approach in order to examine the financial aspects of business management. It addresses solving problems by hand, by using a financial calculator, or by using spreadsheet software. Prerequisites for this text are a basic understanding of accounting principles and enough algebra to handle rearranging equations. Rudimentary spreadsheet exposure is beneficial, but not mandatory. Therefore, this book is appropriate for courses that range from a minimal equation approach, designed for a broader business audience, to a more rigorous approach, designed for finance majors.

1.1 Finance in the World

1.2 Finance in Business

1.3 The Role of a Financial Manager

1.4 End-of-Chapter Exercises

Chapter 2: Ethics and Finance

2.1 Ethics Foundations

2.2 Ethics in Finance

2.3 Ethics in Management

2.4 International Considerations

2.5 The Bigger Picture

2.6 End-of-Chapter Exercises

Chapter 3: Financial Statements

3.1 The Income Statement

3.2 The Balance Sheet

3.3 The Cash Flow Statement

3.4 Other Statements

3.5 Taxes

3.6 Cash Flow

3.7 Ratio Analysis

3.8 DuPont Analysis and Comparisons

3.9 Worked Problems: Niks 2 Inc.

3.10 The Bigger Picture

3.11 End-of-Chapter Exercises

Chapter 4: Pro Forma Statements

4.1 Pro Forma Income Statement

4.2 Pro Forma Balance Sheet

4.3 Assessment of Pro Forma Statements

4.4 The Bigger Picture

4.5 End-of-Chapter Problems

Chapter 5: Time Value of Money: One Cash Flow

5.1 Present Value and Future Value

5.2 Principal and Interest

5.3 Simple Interest

5.4 Compound Interest

5.5 Solving Compound Interest Problems

5.6 Effective Interest Rates

5.7 End-of-Chapter Problems

Chapter 6: Time Value of Money: Multiple Flows

6.1 Multiple Cash Flows

6.2 Perpetuities

6.3 Annuities

6.4 Loan Amortization

6.5 The Bigger Picture

6.6 End-of-Chapter Problems

Chapter 7: Securities Markets

7.1 Financial Environment: Institutions and Markets

7.2 Regulation of Financial Institutions

7.3 Modern History of Financial Crises

7.4 Types of Financial and Other Traded Assets

7.5 The Bigger Picture

7.6 End-of-Chapter Problems

Chapter 8: Interest Rates and Bond Valuation

8.1 Bonds and Interest Rates

8.2 Credit Risk

8.3 Bond Yield

8.4 Bond Valuation

8.5 The Bigger Picture

8.6 End-of-Chapter Problems

Chapter 9: Stock Valuation

9.1 Common and Preferred Stock

9.2 Dividend Discount Model

9.3 Market Multiples Approach

9.4 Free Cash Flow Approach

9.5 The Bigger Picture

9.6 End-of-Chapter Problems

Chapter 10: Assessing Risk

10.1 Risk and Return Basics

10.2 Portfolios

10.3 Market Efficiency

10.4 Standard Deviation

10.5 Market History

10.6 The Capital Asset Pricing Model (CAPM)

10.7 The Bigger Picture

10.8 End-of-Chapter Problems

Chapter 11: Cost of Capital

11.1 Cost of Capital Overview

11.2 Cost of Debt

11.3 Cost of Preferred Stock

11.4 Cost of Common Stock

11.5 Weighted Average Cost of Capital (WACC)

11.6 WACC and Investment Decisions

11.7 The Bigger Picture

11.8 End-of-Chapter Problems

Chapter 12: Capital Budgeting Decision Making

12.1 Introduction to Capital Budgeting Techniques

12.2 Payback Period

12.3 Net Present Value

12.4 Internal Rate of Return

12.5 Other Methods

12.6 Comparing Projects with Unequal Lives

12.7 Approaches for Dealing with Risk

12.8 The Bigger Picture

12.9 End-of-Chapter Problems

Chapter 13: Capital Budgeting Cash Flows

13.1 Which Cash Flows Should I Include?

13.2 Capital Spending and Salvage Value

13.3 Operating Cash Flows

13.4 Changes in Net Working Capital

13.5 Making the Investment Decision

13.6 The Bigger Picture

13.7 End-of-Chapter Exercises

Chapter 14: Raising Capital and Capital Structure

14.1 Life Cycle of a Firm

14.2 Leverage

14.3 Capital Structure

14.4 Choosing the Optimal Capital Structure

14.5 The Bigger Picture

14.6 End-of-Chapter Exercises

Chapter 15: Dividend Policy

15.1 Dividend Basics

15.2 Dividend Policy

15.3 Other Forms of Dividends

15.4 The Bigger Picture

15.5 End-of-Chapter Exercises

Chapter 16: Cash and the Cash Conversion Cycle

16.1 Financial Planning

16.2 Cash Budgets

16.3 Net Working Capital Basics

16.4 Cash Conversion Cycle

16.5 The Bigger Picture

16.6 End-of-Chapter Exercises

Chapter 17: Current Assets and Current Liabilities Management

17.1 Inventory Management

17.2 Accounts Receivable Management

17.3 Cash Management and Investing Idle Cash

17.4 Accounts Payable Management

17.5 Accruals Management

17.6 Short-Term Loans (Unsecured)

17.7 Secured Uses of Funds

17.8 The Bigger Picture

17.9 End-of-Chapter Exercises

Chapter 18: International Considerations

18.1 Multinational Corporations

18.2 Taxes and Reporting

18.3 Exchange Rates

18.4 Other Risk Factors

18.5 Investment Decisions

18.6 The Bigger Picture

18.7 End-of-Chapter Exercises

Chapter 19: Derivatives and Hedging

19.1 Futures and Forwards

19.2 Options

19.3 Convertible Securities

19.4 Hedging Risk

19.5 The Bigger Picture

19.6 End-of-Chapter Exercises

Chapter 20: Mergers, Acquisitions, and Divestitures

20.1 Mergers and Acquisitions

20.2 Leveraged Buyouts

20.3 Reorganization and Bankruptcy

20.4 The Bigger Picture

20.5 End-of-Chapter Exercises

Appendix A: Review of Math Concepts

A.1 What do you know? Math Pre-Test

A.2 Review of Helpful Math Concepts

A.3 Review of Elementary Algebra

A.4 End-of-Chapter Assessment

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Amy K. S. Scott

DeSales University

Amy Scott (Ph.D. Lehigh University) is Associate Professor of Business at DeSales University. Her doctoral studies in economics included concentrations in public finance and international economics. Amy teaches courses in economics and finance at both the undergraduate and graduate level, including economics of public issues, principles of macroeconomics and microeconomics, and personal and managerial finance.

Her research includes regional economic impact studies and the impact of corruption on economic development. Amy’s articles have appeared in several journals, including International Economic Journal, Thunderbird International Business Review, Sport Management International Journal, and Journal of Sport and Tourism.

Bradley C. Barnhorst

DeSales University

Bradley C. Barnhorst (MBA The Pennsylvania State University) is Chair of the Finance Major and

Associate Professor of Business at DeSales University and Investment Committee Counsel for Canon

Capital Wealth Management. Brad teaches corporate finance, investments, and portfolio management to undergraduate and MBA students. His years of industry experience include pricing, trading, and hedging equity derivatives and structured products at Bear Stearns. He is a member of the CFA Institute and is a CFA charter holder.

Brad’s research focuses on analysis of derivative pricing with a concentration on ETFs, behavioral finance effects in market microstructure, and data analytics in finance. He has a special interest in technology in the classroom, particularly in the use of computer simulations for immersive learning.

Additions & Errata

Changed Cash and Cash Equivalents value from "20.0" to "21.9" in "Table 4.7 Pet Products Forever Inc. Pro Forma Balance Sheet Second Pass (Thousands) 2018" in Chaper 4, Section 2 (5/6/21)