Fundamentals of Financial Management 15th Edition. Eugene F. View as Instructor. Whether you need access offline or online, in print or on your mobile device, we have cost saving options. Tell me about Cengage eTextbooks. Best value! Non-finance majors sometimes wonder why they need to learn finance.
As we have structured the book, it quickly becomes obvious to everyone why they need to understand time value, risk, markets, and valuation. Virtually all students enrolled in the basic course expect at some point to have money to invest, and they quickly realize that the knowledge gained from Chapters 1 through 9 will help them make better investment decisions.
Moreover, students who plan to go into the business world soon realize that their own success requires that their firms be successful, and the topics covered in Chapters 10 through 21 will be helpful here. Managers have a responsibility to behave ethically, and when striving to maximize value, they must abide by constraints such as not polluting the environment, not engaging in unfair labor practices, not breaking the antitrust laws, and the like.
In Chapter 1, we discuss the concept of valuation, explain how it depends on future cash flows and risk, and show why value maximization is good for society in general.
This valuation theme runs throughout the text. Stock and bond values are determined in the financial markets, so an understanding of those markets is essential to anyone involved with finance.
Therefore, Chapter 2 covers the major types of financial markets, the rates of return that investors have historically earned on different types of securities, and the risks inherent in these securities.
This information is important for anyone working in finance, and it is also important for anyone who has or hopes to own any financial assets. In this chapter, we also highlight how this environment has changed in the aftermath of the financial crisis. Asset values depend in a fundamental way on earnings and cash flows as reported in the accounting statements. This market-leading text offers a unique balance of clear concepts, contemporary theory, and practical applications in order to help students understand the concepts and reasons behind corporate budgeting, financing, working capital decision making, forecasting, valuation, and Time Value of Money TVM.
Offering the most cutting-edge coverage available, the Fourteenth Edition includes discussions of the federal debt, the ongoing recovery of financial markets, and the European debt crisis. Numerous practical examples, Quick Questions, and Integrated Cases demonstrate theory in action.
Important Notice: Media content referenced within the product description or the product text may not be available in the ebook version. The thoroughly revised seventh edition of Fundamentals of Financial Management discusses the fundamental principles and techniques of financial management. The book shows how a wide range of financial decisions should be analysed. It aptly illustrates various theories, concepts, tools and techniques of financial management with the help of suitable examples and various illustrations.
Intended as an introductory course, this text contains updated institutional material which is international in scope and deals with the effects of electronic commerce. It provides tips, questions and answers and special features. Engaging and easy to understand, this complete introduction to corporate finance emphasizes the concept of valuation throughout and Time Value of Money TVM early, giving you time to absorb the concepts fully.
Numerous examples, end-of-chapter applications, and Integrated Cases give you a better understanding of the concepts and reasons behind corporate budgeting, financing, and working capital decision making. In addition, Excel Spreadsheet Models help you master this critical software tool. Briefly describe each of the following financial institutions: investment banks, commercial banks, financial services corporations, pension funds, mutual funds, exchange traded funds, hedge funds, and private equity companies.
Commercial banks are the traditional department stores of finance serving a variety of savers and borrowers. Historically, they were the major institutions that handled checking accounts and through which the Federal Reserve System expanded or contracted the money supply. Today, however, several other institutions also provide checking services and significantly influence the money supply. Conversely, commercial banks are providing an everwidening range of services, including stock brokerage services and insurance.
Financial services corporations are large conglomerates that combine many different financial institutions within a single corporation. Most financial services corporations started in one area but have now diversified to cover most of the financial spectrum. Pension funds are retirement plans funded by corporations or government agencies for their workers and are administered primarily by the trust departments of commercial banks or by life insurance companies.
Pension funds invest primarily in bonds, stocks, mortgages, and real estate. Mutual funds are corporations that accept money from savers and then use these funds to buy stocks, long-term bonds, or shortterm debt instruments issued by businesses or government units.
These organizations pool funds and thus reduce risks by diversification. Exchange traded funds ETFs are similar to regular mutual funds and are often operated by mutual fund companies. Hedge funds are similar to mutual funds because they accept money from savers and use the funds to buy various securities, but there are some important differences.
While mutual funds are registered and regulated by the SEC, hedge funds are largely unregulated. These funds received their name because they traditionally were used when an individual was trying to hedge risks. Private equity companies are organizations that operate much like hedge funds, but rather than buying some of the stock of a firm, private equity players buy and then manage entire firms.
Most of the money used to buy the target companies is borrowed. There are just two basic types of stock markets: 1 physical location exchanges, which include the New York Stock Exchange NYSE , and 2 electronic dealer-based markets that include the Nasdaq stock market, the less formal over-the-counter market, and the recently developed electronic communications networks ECNs.
The physical location exchanges are formal organizations having tangible, physical locations and trading in designated securities. There are exchanges for stocks, bonds, commodities, futures, and options. The physical location exchanges are conducted as auction markets with securities going to the highest bidder. Buyers and sellers place orders with their brokers who then execute those orders by matching buyers and sellers, although specialists assist in providing continuity to the markets.
The electronic dealer-based market is made up of hundreds of brokers and dealers around the country who are connected electronically by telephones and computers.
The dealer-based market facilitates trading of securities that are not listed on a physical location exchange. A dealer market is defined to include all facilities that are needed to conduct security transactions not made on the physical location exchanges.
These facilities include 1 the relatively few. Dealers continuously post a price at which they are willing to buy the stock the bid price and a price at which they are willing to sell the stock the ask price. If Apple decided to issue additional common stock, and Varga purchased shares of this stock from Smyth Barry, the underwriter, would this transaction be a primary or a secondary market transaction?
Would it make a difference if Varga purchased previously outstanding Apple stock in the dealer market? Once issued, the stock trades in the secondary market. Use these slides to show market performance in recent years and how to read a stock quote. What does it mean for a market to be efficient? Explain why some stock prices may be more efficient than others.
If markets are inefficient, then investors will be afraid to invest, and this will lead to a poor allocation of capital and economic stagnation. So from an economic standpoint, market efficiency is clearly good. Also, different companies communicate better with analysts and investors generally, and the better the communications, the more efficient the market for the stock. After your consultation with Michelle, she wants to discuss these two possible stock purchases: 1 While in the waiting room of your office, she overheard an analyst on a financial TV network say that a particular medical research company just received FDA approval for one of its products.
Assuming the stock market is highly efficient, what advice would you give her? She wants to purchase as many shares in the IPO as possible and would even be willing to buy the shares in the open market immediately after the issue.
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