Essentials of Corporate Finance, 5th Australian Edition by Stephen Ross Test Bank

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Test Bank for Essentials of Corporate Finance, 5th Australian Edition, 5ae by Stephen Ross, Rowan Trayler, Gerhard Van de Venter TEST BANK ISBN-13: 9781760423605 FULL CHAPTERS INCLUDED Chapter 1 ... Introduction to financial management Part 1 Overview of Financial Management Introduction 1.1 Finance: A Quick Look THE FOUR BASIC AREAS CORPORATE FINANCE INVESTMENTS FINANCIAL INSTITUTIONS INTERNATIONAL FINANCE WHY STUDY FINANCE? MARKETING AND FINANCE ACCOUNTING AND FINANCE MANAGEMENT AND FINANCE YOU AND FINANCE 1.2 Business Finance and The Financial Manager WHAT IS BUSINESS FINANCE? THE FINANCIAL MANAGER FINANCIAL MANAGEMENT DECISIONS CAPITAL BUDGETING CAPITAL STRUCTURE WORKING CAPITAL MANAGEMENT CONCLUSION 1.3 Forms of Business Organisation SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION A CORPORATION BY ANOTHER NAME … 1.4 The Goal of Financial Management PROFIT MAXIMISATION THE GOAL OF FINANCIAL MANAGEMENT IN A CORPORATION A MORE GENERAL FINANCIAL MANAGEMENT GOAL CORPORATE GOVERNANCE 1.5 The Agency Problem and Control of the Corporation AGENCY RELATIONSHIPS MANAGEMENT GOALS DO MANAGERS ACT IN THE SHAREHOLDERS’ INTERESTS? MANAGERIAL COMPENSATION CONTROL OF THE FIRM CONCLUSION STAKEHOLDERS 1.6 Financial Markets and the Corporation CASH FLOWS TO AND FROM THE FIRM PRIMARY VERSUS SECONDARY MARKETS PRIMARY MARKETS SECONDARY MARKETS Summary and Conclusions Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW What’s on the Web? WHAT’S ON THE WEB? Mini Case: The Ozzie Cake Company Chapter 2 Financial statements, taxes and cash flow Part 2 Understanding Financial Statements and Cash Flow Introduction 2.1 The Statement of Financial Position ASSETS: THE LEFT-HAND SIDE LIABILITIES AND SHAREHOLDERS’ EQUITY: THE RIGHT-HAND SIDE NET WORKING CAPITAL LIQUIDITY DEBT VERSUS EQUITY MARKET VALUE VERSUS BOOK VALUE 2.2 The Statement of Profit or Loss AAS AND THE STATEMENT OF PROFIT OR LOSS NON-CASH ITEMS TIME AND COSTS EARNINGS MANAGEMENT 2.3 Taxes CORPORATE TAX RATES AVERAGE VERSUS MARGINAL TAX RATES TAXATION OF DIVIDENDS: DIFFERENCE BETWEEN A CLASSICAL TAX SYSTEM AND AN IMPUTATION SYSTEM 2.4 Cash Flow CASH FLOW FROM ASSETS OPERATING CASH FLOW CAPITAL SPENDING CHANGE IN NET WORKING CAPITAL CONCLUSION A NOTE ON ‘FREE’ CASH FLOW CASH FLOW TO CREDITORS AND SHAREHOLDERS CASH FLOW TO CREDITORS CASH FLOW TO SHAREHOLDERS CONCLUSION AN EXAMPLE: CASH FLOWS FOR APPLE ISLE OPERATING CASH FLOW NET CAPITAL SPENDING CHANGE IN NWC AND CASH FLOW FROM ASSETS CASH FLOW TO CREDITORS AND SHAREHOLDERS Summary and Conclusions Chapter Review and Self-Test Problem CHAPTER REVIEW AND SELF-TEST PROBLEM Answer to Chapter Review and Self-Test Problem ANSWER TO CHAPTER REVIEW AND SELF-TEST PROBLEM Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC (QUESTIONS 1–12) INTERMEDIATE (QUESTIONS 13–22) CHALLENGE QUESTION (23) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Cash Flows and Financial Statements at Byron Bay Boards Ltd Chapter 3 Working with financial statements Introduction 3.1 Standardised Financial Statements COMMON-SIZE STATEMENTS OF FINANCIAL POSITION COMMON-SIZE STATEMENTS OF PROFIT OR LOSS 3.2 Ratio Analysis SHORT-TERM SOLVENCY, OR LIQUIDITY, MEASURES CURRENT RATIO QUICK (OR ACID-TEST) RATIO CASH RATIO LONG-TERM SOLVENCY MEASURES TOTAL DEBT RATIO TIMES INTEREST EARNED CASH COVERAGE ASSET MANAGEMENT, OR TURNOVER, MEASURES INVENTORY TURNOVER AND DAYS’ SALES IN INVENTORY RECEIVABLES TURNOVER AND DAYS’ SALES IN RECEIVABLES TOTAL ASSET TURNOVER PROFITABILITY MEASURES PROFIT MARGIN RETURN ON ASSETS RETURN ON EQUITY MARKET VALUE MEASURES PRICE EARNINGS RATIO Price–sales ratio MARKET-TO-BOOK RATIO ENTERPRISE VALUE—EBITDA4 RATIO 3.3 The DuPont Identity AN EXPANDED DUPONT ANALYSIS 3.4 Internal and Sustainable Growth DIVIDEND PAYOUT AND EARNINGS RETENTION ROA, ROE AND GROWTH THE INTERNAL GROWTH RATE THE SUSTAINABLE GROWTH RATE DETERMINANTS OF GROWTH A NOTE ON SUSTAINABLE GROWTH RATE CALCULATIONS 3.5 Using Financial Statement Information WHY EVALUATE FINANCIAL STATEMENTS? INTERNAL USES EXTERNAL USES CHOOSING A BENCHMARK TIME-TREND ANALYSIS PEER GROUP ANALYSIS PROBLEMS WITH FINANCIAL STATEMENT ANALYSIS Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–26) INTERMEDIATE QUESTIONS (27–46) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Ratios and Financial Planning At Kiwi Yachts Ltd Chapter 4 Introduction to valuation: The time value of money Part 3 Valuation of Future Cash Flows Introduction 4.1 Future Value and Compounding INVESTING FOR A SINGLE PERIOD INVESTING FOR MORE THAN ONE PERIOD 4.2 Present Value and Discounting THE SINGLE-PERIOD CASE PRESENT VALUES FOR MULTIPLE PERIODS 4.3 More on Present and Future Values PRESENT VERSUS FUTURE VALUE DETERMINING THE DISCOUNT RATE FINDING THE NUMBER OF PERIODS Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–15) INTERMEDIATE QUESTIONS (16–25) CHALLENGE QUESTIONS (26–27) What’s on the Web? WHAT’S ON THE WEB? Chapter 5 Discounted cash flow valuation Introduction 5.1 Future and Present Values of Multiple Cash Flows FUTURE VALUE WITH MULTIPLE CASH FLOWS PRESENT VALUE WITH MULTIPLE CASH FLOWS A NOTE ON CASH FLOW TIMING 5.2 Valuing Level Cash Flows: Annuities and Perpetuities PRESENT VALUE FOR ANNUITY CASH FLOWS ANNUITY TABLES FINDING THE PAYMENT FINDING THE RATE FUTURE VALUE FOR ANNUITIES A NOTE ON ANNUITIES DUE PERPETUITIES 5.3 Comparing Rates: The Effect of Compounding Periods EFFECTIVE ANNUAL RATES AND COMPOUNDING CALCULATING AND COMPARING EFFECTIVE ANNUAL RATES EARS AND APRS EARS, APRS, FINANCIAL CALCULATORS AND SPREADSHEETS 5.4 Loan Types and Loan Amortisation PURE DISCOUNT LOANS INTEREST-ONLY LOANS AMORTISED LOANS Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–28) INTERMEDIATE QUESTIONS (29–56) CHALLENGE QUESTIONS (57–60) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Kiwi Yachts’ Mortgage Chapter 6 Interest rates, bill and bond valuation Part 4 Valuing Shares and Bonds Introduction 6.1 Bills of Exchange and Bill Valuation BILL OF EXCHANGE, FEATURES AND PRICING BILL VALUES AND YIELDS MORE ON BILL FEATURES 6.2 Other Short-Term Funding Instruments 6.3 Bonds and Bond Valuation BOND FEATURES AND PRICES BOND VALUES AND YIELDS INTEREST RATE RISK FINDING THE YIELD TO MATURITY: MORE TRIAL AND ERROR 6.4 More on Bond Features IS IT DEBT OR EQUITY? NON-CURRENT DEBT: THE BASICS THE TRUST DEED TERMS OF A BOND SECURITY SENIORITY REPAYMENT THE CALL PROVISION PROTECTIVE COVENANTS 6.5 Bond Ratings 6.6 Some Different Types of Bonds GOVERNMENT BONDS ZERO COUPON BONDS FLOATING-RATE BONDS OTHER TYPES OF BONDS 6.7 Bond Markets HOW BONDS ARE BOUGHT AND SOLD BOND PRICE REPORTING 6.8 Inflation and Interest Rates REAL VERSUS NOMINAL RATES THE FISHER EFFECT 6.9 Determinants of Bond Yields THE TERM STRUCTURE OF INTEREST RATES BOND YIELDS AND THE YIELD CURVE: PUTTING IT ALL TOGETHER CONCLUSION Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–16) INTERMEDIATE QUESTIONS (17–30) CHALLENGE QUESTIONS (31–32) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Financing Kiwi Yachts Expansion Plans with a Bond Issue Chapter 7 Equity markets and share valuation Introduction 7.1 Ordinary Share Valuation CASH FLOWS SOME SPECIAL CASES ZERO GROWTH CONSTANT GROWTH NON-CONSTANT GROWTH COMPONENTS OF THE REQUIRED RETURN SHARE VALUATION USING MULTIPLES 7.2 Some Features of Ordinary Compounding Periods ORDINARY SHARE FEATURES SHAREHOLDERS’ RIGHTS PROXY VOTING CLASSES OF SHARES OTHER RIGHTS DIVIDENDS CONCLUSION PREFERENCE SHARE FEATURES STATED VALUE CUMULATIVE AND NON-CUMULATIVE DIVIDENDS ARE PREFERENCE SHARES REALLY DEBT? 7.3 The Share Markets DEALERS AND BROKERS ORGANISATION OF THE ASX OPERATIONS SHARE MARKET REPORTING Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–14) INTERMEDIATE QUESTIONS (15–30) CHALLENGE QUESTIONS (31–32) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Share Valuation at Gold Coast Constructions Chapter 8 Net present value and other investment criteria Part 5 Capital Budgeting Introduction 8.1 Net Present Value THE BASIC IDEA ESTIMATING NET PRESENT VALUE 8.2 The Payback Rule DEFINING THE PAYBACK RULE ANALYSING THE PAYBACK RULE REDEEMING QUALITIES OF THE RULE SUMMARY OF THE RULE 8.3 The Average Accounting Return 8.4 The Internal Rate of Return PROBLEMS WITH THE IRR NON-CONVENTIONAL CASH FLOWS MUTUALLY EXCLUSIVE INVESTMENTS REDEEMING QUALITIES OF THE IRR THE MODIFIED INTERNAL RATE OF RETURN (MIRR) METHOD 1: THE DISCOUNTING APPROACH METHOD 2: THE REINVESTMENT APPROACH METHOD 3: THE COMBINATION APPROACH MIRR OR IRR: WHICH IS BETTER? 8.5 The Profitability Index 8.6 The Practice of Capital Budgeting Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–22) INTERMEDIATE QUESTIONS (23–27) CHALLENGE QUESTIONS (28–30) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Cadia East Gold Mines Chapter 9 Making capital investment decisions Introduction 9.1 Project Cash Flows: A First Look RELEVANT CASH FLOWS THE STAND-ALONE PRINCIPLE 9.2 Incremental Cash Flows SUNK COSTS OPPORTUNITY COSTS SIDE EFFECTS NET WORKING CAPITAL (NWC) FINANCING COSTS OTHER ISSUES 9.3 Pro Forma Financial Statements and Project Cash Flows GETTING STARTED: PRO FORMA FINANCIAL STATEMENTS PROJECT CASH FLOWS PROJECT OPERATING CASH FLOW PROJECT NET WORKING CAPITAL AND CAPITAL SPENDING PROJECTED TOTAL CASH FLOW AND VALUE THE TAX SHIELD APPROACH 9.4 More on Project Cash Flow A CLOSER LOOK AT NET WORKING CAPITAL DEPRECIATION DEPRECIATION BOOK VALUE VERSUS MARKET VALUE AN EXAMPLE: THE MAJESTIC MULCH AND COMPOST COMPANY (MMCC) OPERATING CASH FLOWS CHANGES IN NWC CAPITAL SPENDING TOTAL CASH FLOW AND VALUE CONCLUSION 9.5 Evaluating NPV Estimates THE BASIC PROBLEM FORECASTING RISK SOURCES OF VALUE 9.6 Scenario and Other What-if Analyses GETTING STARTED SCENARIO ANALYSIS SENSITIVITY ANALYSIS 9.7 Additional Considerations in Capital Budgeting MANAGERIAL OPTIONS AND CAPITAL BUDGETING CONTINGENCY PLANNING STRATEGIC OPTIONS CONCLUSION CAPITAL RATIONING SOFT RATIONING HARD RATIONING Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–20) INTERMEDIATE QUESTIONS (21–24) CHALLENGE QUESTIONS (25–26) Mini Case: Emu Electronics Chapter 10 Some lessons from capital market history Part 6 Risk and Return Introduction 10.1 Returns DOLLAR RETURNS PERCENTAGE RETURNS 10.2 The Historical Record A FIRST LOOK A CLOSER LOOK 10.3 Average Returns: The First Lesson CALCULATING AVERAGE RETURNS AVERAGE RETURNS: THE HISTORICAL RECORD RISK PREMIUMS THE FIRST LESSON 10.4 The Variability of Returns: The Second Lesson FREQUENCY DISTRIBUTIONS AND VARIABILITY THE HISTORICAL VARIANCE AND STANDARD DEVIATION THE HISTORICAL RECORD NORMAL DISTRIBUTION THE SECOND LESSON 2008: THE BEAR GROWLED AND INVESTORS HOWLED USING CAPITAL MARKET HISTORY MORE ON THE SHARE MARKET RISK PREMIUM 10.5 More on Average Returns ARITHMETIC VERSUS GEOMETRIC AVERAGES CALCULATING GEOMETRIC AVERAGE RETURNS ARITHMETIC AVERAGE RETURN OR GEOMETRIC AVERAGE RETURN? 10.6 Capital Market Efficiency PRICE BEHAVIOUR IN AN EFFICIENT MARKET THE EFFICIENT MARKETS HYPOTHESIS SOME COMMON MISCONCEPTIONS ABOUT THE EMH THE FORMS OF MARKET EFFICIENCY IMPLICATIONS OF THE EMH FOR CORPORATE FINANCE Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–18) INTERMEDIATE QUESTIONS (19–26) CHALLENGE QUESTIONS (27–28) What’s on the Web? WHAT’S ON THE WEB? Mini Case: A Job at Kiwi Yachts Chapter 11 Risk and return Introduction 11.1 Expected Returns and Variances EXPECTED RETURN CALCULATING THE VARIANCE 11.2 Portfolios PORTFOLIO WEIGHTS PORTFOLIO EXPECTED RETURNS PORTFOLIO VARIANCE 11.3 Announcements, Surprises and Expected Returns EXPECTED AND UNEXPECTED RETURNS ANNOUNCEMENTS AND NEWS 11.4 Risk: Systematic and Unsystematic SYSTEMATIC AND UNSYSTEMATIC RISK SYSTEMATIC AND UNSYSTEMATIC COMPONENTS OF RETURN 11.5 Diversification and Portfolio Risk THE EFFECT OF DIVERSIFICATION: ANOTHER LESSON FROM MARKET HISTORY THE PRINCIPLE OF DIVERSIFICATION DIVERSIFICATION AND UNSYSTEMATIC RISK DIVERSIFICATION AND SYSTEMATIC RISK 11.6 Systematic Risk and Beta THE SYSTEMATIC RISK PRINCIPLE MEASURING SYSTEMATIC RISK PORTFOLIO BETAS 11.7 The Security Market Line BETA AND THE RISK PREMIUM THE REWARD-TO-RISK RATIO THE BASIC ARGUMENT THE FUNDAMENTAL RESULT THE SECURITY MARKET LINE MARKET PORTFOLIOS THE CAPITAL ASSET PRICING MODEL 11.8 The SML and The Cost of Capital: A Preview THE BASIC IDEA THE COST OF CAPITAL Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–24) INTERMEDIATE QUESTIONS (25–27) CHALLENGE QUESTIONS (28–30) What’s on the Web? WHAT’S ON THE WEB? Mini Case: The Beta for Coca-Cola Amatil Ltd Chapter 12 Cost of capital Part 7 Long-Term Financing Introduction 12.1 The Cost of Capital: Some Preliminaries REQUIRED RETURN VERSUS COST OF CAPITAL FINANCIAL POLICY AND COST OF CAPITAL 12.2 The Cost of Equity THE DIVIDEND GROWTH MODEL APPROACH IMPLEMENTING THE APPROACH ESTIMATING g ADVANTAGES AND DISADVANTAGES OF THE APPROACH THE SML APPROACH IMPLEMENTING THE APPROACH ADVANTAGES AND DISADVANTAGES OF THE APPROACH 12.3 The Costs of Debt and Preference Shares THE COST OF DEBT THE COST OF PREFERENCE SHARES 12.4 The Weighted Average Cost of Capital THE CAPITAL STRUCTURE WEIGHTS TAXES AND THE WEIGHTED AVERAGE COST OF CAPITAL TAXES AND THE WEIGHTED AVERAGE COST OF CAPITAL (IMPUTATION TAX SYSTEM) SOLVING THE WAREHOUSE PROBLEM AND SIMILAR CAPITAL BUDGETING PROBLEMS CALCULATING THE WACC FOR JB HI-FI LTD JB HI-FI—COST OF EQUITY JB HI-FI—COST OF DEBT JB HI-FI—WACC 12.5 Divisional and Project Costs of Capital THE SML AND THE WACC DIVISIONAL COST OF CAPITAL THE PURE PLAY APPROACH THE SUBJECTIVE APPROACH 12.6 Company Valuation with the WACC Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–20) INTERMEDIATE QUESTIONS (20–26) CHALLENGE QUESTIONS (27–28) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Cost of Capital for Hubbard Computer Ltd Chapter 13 Leverage and capital structure Introduction 13.1 The Capital Structure Question 13.2 The Effect of Financial Leverage THE IMPACT OF FINANCIAL LEVERAGE FINANCIAL LEVERAGE, EPS AND ROE: AN EXAMPLE EPS VERSUS EBIT CORPORATE BORROWING AND HOMEMADE LEVERAGE 13.3 Capital Structure and the Cost of Equity Capital M&M PROPOSITION I: THE PIE MODEL THE COST OF EQUITY AND FINANCIAL LEVERAGE: M&M PROPOSITION II BUSINESS AND FINANCIAL RISK 13.4 Corporate Taxes and Capital Structure THE INTEREST TAX SHIELD TAXES AND M&M PROPOSITION I CAPITAL STRUCTURE AND DIVIDEND IMPUTATION DIVIDEND IMPUTATION AND THE EFFECT ON THE INTEREST TAX SHIELD CONCLUSION 13.5 Bankruptcy/Liquidation Costs DIRECT LIQUIDATION COSTS INDIRECT LIQUIDATION COSTS 13.6 Optimal Capital Structure THE STATIC THEORY OF CAPITAL STRUCTURE OPTIMAL CAPITAL STRUCTURE AND THE COST OF CAPITAL CAPITAL STRUCTURE: SOME MANAGERIAL RECOMMENDATIONS TAXES FINANCIAL DISTRESS 13.7 Observed Capital Structures 13.8 A Quick Look at the Bankruptcy/Liquidation Process LIQUIDATION AND REORGANISATION BANKRUPTCY/LIQUIDATION FINANCIAL MANAGEMENT AND THE BANKRUPTCY/LIQUIDATION PROCESS AGREEMENTS TO AVOID BANKRUPTCY/LIQUIDATION Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–13) INTERMEDIATE QUESTIONS (14–16) CHALLENGE QUESTIONS (17–20) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Stephenson Real Estate Recapitalisation Chapter 14 Dividends and dividend policy Introduction 14.1 Cash Dividends and Dividend Payment CASH DIVIDENDS STANDARD METHOD OF CASH DIVIDEND PAYMENT DIVIDEND PAYMENT: A CHRONOLOGY MORE ON THE EX-DIVIDEND DATE 14.2 Does Dividend Policy Matter? AN ILLUSTRATION OF THE IRRELEVANCE OF DIVIDEND POLICY CURRENT POLICY: DIVIDENDS SET EQUAL TO CASH FLOW ALTERNATIVE POLICY: INITIAL DIVIDEND GREATER THAN CASH FLOW A TEST SOME REAL-WORLD FACTORS FAVOURING A LOW PAYOUT TAXES FLOTATION COSTS DIVIDEND RESTRICTIONS SOME REAL-WORLD FACTORS FAVOURING A HIGH PAYOUT DESIRE FOR CURRENT INCOME TAX AND LEGAL BENEFITS FROM HIGH DIVIDENDS CLIENTELE EFFECTS: A RESOLUTION OF REAL-WORLD FACTORS? 14.3 Share Repurchases: An Alternative to Cash Dividends CASH DIVIDENDS VERSUS REPURCHASE REAL-WORLD CONSIDERATIONS IN A REPURCHASE SHARE REPURCHASE AND EPS 14.4 What We Know and do not Know about Dividend and Payout Policies CORPORATIONS SMOOTH DIVIDENDS PUTTING IT ALL TOGETHER SOME SURVEY EVIDENCE ON DIVIDENDS 14.5 Bonus Issues and Share Splits VALUE OF SHARE SPLITS AND BONUS ISSUES THE BENCHMARK CASE POPULAR TRADING RANGE REVERSE SPLITS Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEM Answer to Chapter Review and Self-Test Problem ANSWER TO CHAPTER REVIEW AND SELF-TEST PROBLEM Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–11) INTERMEDIATE QUESTIONS (12–13) CHALLENGE QUESTIONS (14–15) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Electronic Timing Ltd Chapter 15 Raising capital Introduction 15.1 The Financing Life Cycle of a Firm: Early-Stage Financing and Venture Capital VENTURE CAPITAL SOME VENTURE CAPITAL REALITIES CHOOSING A VENTURE CAPITALIST CONCLUSION 15.2 Selling Securities to the Public: The Basic Procedure CROWDFUNDING INITIAL COIN OFFERINGS 15.3 Alternative issue methods 15.4 Underwriters CHOOSING AN UNDERWRITER TYPES OF UNDERWRITING STANDBY UNDERWRITING BEST EFFORTS UNDERWRITING DUTCH AUCTION UNDERWRITING UNDERWRITING FEES 15.5 IPOs and Underpricing EVIDENCE ON UNDERPRICING RECENT EXAMPLES WHY DOES UNDERPRICING EXIST? 15.6 New Equity Sales and the Value of the Firm 15.7 The Cost of Issuing Securities 15.8 Issuing Long-Term Debt Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEM Answer to Chapter Review and Self-Test Problem ANSWER TO CHAPTER REVIEW AND SELF-TEST PROBLEM Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–7) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Kiwi Yachts Goes Public Chapter 16 Short-term financial planning Part 8 Short-term Financial Management Introduction 16.1 Tracing Cash and Net Working Capital 16.2 The Operating Cycle and the Cash Cycle DEFINING THE OPERATING AND CASH CYCLES THE OPERATING CYCLE THE CASH CYCLE THE OPERATING CYCLE AND THE FIRM’S ORGANISATIONAL CHART CALCULATING THE OPERATING AND CASH CYCLES THE OPERATING CYCLE THE CASH CYCLE INTERPRETING THE CASH CYCLE 16.3 Some Aspects of Short-Term Financial Policy THE SIZE OF THE FIRM’S INVESTMENT IN CURRENT ASSETS ALTERNATIVE FINANCING POLICIES FOR CURRENT ASSETS WHICH FINANCING POLICY IS BEST? CURRENT ASSETS AND LIABILITIES IN PRACTICE 16.4 The Cash Budget SALES AND CASH COLLECTIONS CASH OUTFLOWS THE CASH BALANCE 16.5 Short-Term Financing UNSECURED LOANS SECURED LOANS ACCOUNTS RECEIVABLE FINANCING INVENTORY LOANS OTHER SOURCES 16.6 A Short-Term Financial Plan Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problems QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–12) INTERMEDIATE QUESTIONS (13–16) CHALLENGE QUESTIONS (17–18) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Jumbuck Manufacturing Working-Capital Management, Part 1 Chapter 17 Working capital management Introduction 17.1 Cash and Liquidity Management REASONS FOR HOLDING CASH OR CASH-LIKE ASSETS THE SPECULATIVE MOTIVE THE PRECAUTIONARY MOTIVE THE TRANSACTION MOTIVE BENEFITS OF LIQUIDITY ELECTRONIC DATA INTERCHANGE 17.2 Cash Management: Collection, Disbursement and Investment CASH COLLECTION MANAGING CASH DISBURSEMENTS CONTROLLING DISBURSEMENTS INVESTING IDLE CASH TEMPORARY CASH SURPLUSES CHARACTERISTICS OF SHORT-TERM SECURITIES SOME DIFFERENT TYPES OF MONEY MARKET SECURITIES 17.3 Credit and Receivables COMPONENTS OF CREDIT POLICY TERMS OF THE SALE THE BASIC FORM THE CREDIT PERIOD CASH DISCOUNTS CREDIT INSTRUMENTS OPTIMAL CREDIT POLICY THE TOTAL CREDIT COST CURVE ORGANISING THE CREDIT FUNCTION COLLECTION POLICY MONITORING RECEIVABLES COLLECTION EFFORT 17.4 Inventory Management THE FINANCIAL MANAGER AND INVENTORY POLICY INVENTORY TYPES INVENTORY COSTS 17.5 Inventory Management Techniques THE ABC APPROACH THE ECONOMIC ORDER QUANTITY MODEL INVENTORY DEPLETION THE CARRYING COSTS THE SHORTAGE COSTS THE TOTAL COSTS EXTENSIONS TO THE EOQ MODEL SAFETY STOCKS REORDER POINTS MANAGING DERIVED-DEMAND INVENTORIES MATERIALS REQUIREMENTS PLANNING JUST-IN-TIME INVENTORY Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEM Answers to Chapter Review and Self-Test Problem ANSWER TO CHAPTER REVIEW AND SELF-TEST PROBLEM Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW Questions and Problem QUESTIONS AND PROBLEMS BASIC QUESTIONS (1–10) INTERMEDIATE QUESTION (12) CHALLENGE QUESTION (13) What’s on the Web? WHAT’S ON THE WEB? Mini Case: Jumbuck Manufacturing Working-Capital Management, Part 2 Chapter 18 International aspects of financial management Part 9 Topics in Business Finance Introduction 18.1 Terminology 18.2 Foreign Exchange Markets and Exchange Rates EXCHANGE RATES EXCHANGE RATE QUOTATIONS CROSS-RATES AND TRIANGLE ARBITRAGE TYPES OF TRANSACTIONS 18.3 Purchasing-Power Parity ABSOLUTE PURCHASING-POWER PARITY RELATIVE PURCHASING-POWER PARITY THE BASIC IDEA THE RESULT CURRENCY APPRECIATION AND DEPRECIATION 18.4 Exchange Rates and Interest Rates COVERED INTEREST ARBITRAGE INTEREST RATE PARITY 18.5 Exchange-Rate Risk SHORT-RUN EXPOSURE LONG-RUN EXPOSURE TRANSLATION EXPOSURE MANAGING EXCHANGE-RATE RISK 18.6 Political Risk Summary and Conclusions Chapter Review and Self-Test Problems CHAPTER REVIEW AND SELF-TEST PROBLEMS Answers to Chapter Review and Self-Test Problems ANSWERS TO CHAPTER REVIEW AND SELF-TEST PROBLEMS Critical Thinking and Concepts Review CRITICAL THINKING AND CONCEPTS REVIEW [Show More]

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