Corporate Finance Principles & Practice

 Corporate Finance Principles & Practice

Corporate finance is concerned with the financing and investment decisions made by

the management of companies in pursuit of corporate goals. As a subject, corporate

finance has a theoretical base which has evolved over many years and which continues

to evolve as we write. It has a practical side too, concerned with the study of how com-

panies actually make financing and investment decisions, and it is often the case that

theory and practice disagree.

The fundamental problem that faces financial managers is how to secure the greatest

possible return in exchange for accepting the smallest amount of risk. This necessarily

requires that financial managers have available to them (and are able to use) a range of

appropriate tools and techniques. These will help them to value the decision options

open to them and to assess the risk of those options. The value of an option depends

upon the extent to which it contributes towards the achievement of corporate goals. In

corporate finance, the fundamental goal is usually taken to be to increase the wealth of

shareholders.

The aim of this book

The aim of this text is to provide an introduction to the core concepts and key topic

areas of corporate finance in an approachable, ‘user-friendly’ style. Many texts on

corporate finance adopt a theory-based or mathematical approach which are not

appropriate for those coming to the subject for the first time. This book covers the core

concepts and key topic areas without burdening the reader with what we regard as

unnecessary detail or too heavy a dose of theory.

Flexible course design

Many undergraduate courses are now delivered on a modular or unit basis over one

teaching semester of 12 weeks’ duration. In order to meet the constraints imposed by

such courses, this book has been designed to support self-study and directed learning.

There is a choice of integrated topics for the end of the course.

Each chapter offers:

■ a comprehensive list of key points to check understanding and aid revision;

■ self-test questions, with answers at the end of the book, to check comprehension of

concepts and computational techniques;

■ questions for review, with answers at the end of the book, to aid in deepening

understanding of particular topic areas;

■ questions for discussion, answers for which are available in the Lecturer’s Guide;

■ comprehensive references to guide the reader to key texts and articles;

■ suggestions for further reading to guide readers who wish to study further.

A comprehensive glossary is included at the end of the text to assist the reader in grasp-

ing any unfamiliar terms that may be encountered in the study of corporate finance.

New for the fourth edition

The fourth edition has been extensively revised and updated in order to keep its con-

tent fresh and relevant. Apart from considerable revision of the text, many vignettes

have been updated to reflect current events and developments in the financial world.

The fourth edition has also benefited from a major restructuring in the chapter

sequencing. This has brought a more logical flow to the book, not only in terms of the

order in which the subject material is covered but also from the perspective of the

complexity of the material. The number of questions for review and discussion at

the end of each chapter has been increased. The Companion Website for the book has

been reviewed and updated, with many more multiple choice questions provided to aid

student learning. The PowerPoint slides offered to lecturers have also been revised to

reflect the content of the fourth edition. We trust that our readers will find these

changes useful and constructive.

Target readership

This book has been written primarily for students taking a course in corporate finance

in their second or final year of undergraduate study on business studies, accounting

and finance-related degree programmes. It may also be suitable for students on profes-

sional and postgraduate business and finance courses where corporate finance or

financial management are taught at introductory level.