Corporate Finance: Theory and Practice

The essential corporate finance text, updated with new data Corporate Finance has long been a favourite among both students and professionals in the field for its unique blend of theory and practice with a truly global perspective. The fact that the authors are well-known academics and professionals in the world of mergers and acquisitions (M&A) and investment explains this popularity. This new Fifth Edition continues the tradition, offering a comprehensive tour of the field through scenario-based instruction that places concept and application in parallel. A new chapter has been added, devoted to the financial management of operating buildings that aims to answer questions such as, “to own or to rent?” “variable or fixed rents?” etc. The book’s companion website features regularly updated statistics, graphs and charts, along with study aids including quizzes, case studies, articles, lecture notes and computer models, reflecting the author team’s deep commitment to facilitating well-rounded knowledge of corporate finance topics. In addition, a monthly free newsletter keeps the readers updated on the latest developments in corporate finance as well as the book’s Facebook page, which publishes a post daily. Financial concepts can be quite complex, but a familiar setting eases understanding while immediate application promotes retention over simple memorisation. As comprehensive, relevant skills are the goal, this book blends academic and industry perspective with the latest regulatory and practical developments to provide a complete corporate finance education with real-world applicability. Blend theory and practice to gain a more relevant understanding of corporate finance concepts Explore the field from a truly European perspective for a more global knowledge base Learn essential concepts, tools and techniques by delving into real-world applications Access up-to-date data, plus quizzes, case studies, lecture notes and more A good financial manager must be able to analyse a company’s economic, financial and strategic situation, and then value it, all while mastering the conceptual underpinnings of all decisions involved. By emphasising the ways in which concepts impact and relate to real-world situations, Corporate Finance provides exceptional preparation for working productively and effectively in the field.

Table of Contents:
Preface viii Frequently used symbols xii 1 What is Corporate finance? 1 Section 1 Financial Analysis? 15 Part One Fundamental Concepts in Financial Analysis 17 2 Cash Flow 19 3 Earnings 29 4 Capital Employed and Invested Capital 44 5 Walking Through from Earnings to Cash Flow 57 6 Getting to Grips with Consolidated Accounts 71 7 How to Cope with the Most Complex Points in Financial Accounts 88 Part Two Financial Analysis and Forecasting 115 8 How to Perform a Financial Analysis 117 9 Margin Analysis: Structure 141 10 Margin Analysis: Risks 164 11 Working Capital and Capital Expenditures 179 12 Financing 201 13 Return on Capital Employed and Return on Equity 216 14 Conclusion and Financial Analysis 235 Section II Investors and Markets 243 Part One Investment Decision Rules 245 15 The Financial Markets 247 16 The Time Value of Money and Net Present Value 267 17 The Internal Rate of Return 284 Part Two The Risk of Securities and the Required Rate of Return 297 18 Risk and Return 299 19 The Required Rate of Return 327 Part Three Financial Securities 345 20 Bonds 347 21 Other DEBT Products 369 22 Shares 384 23 Options 404 24 Hybrid Securities 425 25 Selling Securities 443 Section III Value 469 26 Value and Corporate Finance 471 27 Measuring Value Creation 490 28 Investment Criteria 508 29 The Cost of Capital 526 30 Risk and Investment Analysis 543 31 Valuation Techniques 555 Section IV Corporate Financial Policies 585 Part One Capital Structure Policies 587 32 Capital Structure and the Theory of Perfect Capital Markets 589 33 Capital Structure, Taxes and Organisation Theories 601 34 DEBT, Equity and Options Theory 618 35 Working Out Details: The Design of the Capital Structure 637 Part Two Equity Capital 657 36 Returning Cash to Shareholders 659 37 Distribution in Practice: Dividends and Share Buy-Backs 676 38 Share Issues 692 Part Three DEBT Capital 705 39 Implementing a DEBT Policy 707 Section V Financial Management 725 Part One Corporate Governance and Financial Engineering 727 40 Setting Up a Company or Financing Start-Ups 729 41 Choice of Corporate Structure 748 42 Initial Public Offerings (IPOs) 771 43 Corporate Governance 783 44 Taking Control of A Company 796 45 Mergers and Demergers 819 46 Leveraged Buyouts (LBOs) 836 47 Bankrupicy and Restructing 851 Part Two Managing Working Capital, Cash Flows, Financial Risks and Real Estate 863 48 Managing Working Capital 865 49 Cash Management 878 50 Managing Financial Risks 897 51 Managing Operational Real Estate 922 Epilogue – Finance and Strategy 935 Top 20 Largest Listed Companies 943 Contents 951 Index 961

About the Author :
Pierre Vernimmen (deceased) Graduate of HEC and Harvard, was a founding member and first coordinator of the Finance Department at HEC, where he established himself as a leading academic in the field of corporate finance.?In 1973 he joined Paribas, initially as a private equity banker, moving onto the advisory business line (M&A, privatisations, financial restructurings) which he set up and managed from 1993 until his death in 1996. Pascal Quiry (Paris, France) is MD in the Corporate Finance department at BNP Paribas, and affiliate professor of finance at HEC.?He leads two 8-member teams which carry out company valuations and stock exchange transactions (takeover bids, exchange offers, demergers etc.). Pascal is board member of the French Finance Association and member of the American Finance Association. Yann Le Fur?(Paris, France) is a senior associate in the Paris Corporate Finance department of Schroder Salomon Smith Barney, and a lecturer at HEC. He co-manages a team of 5 professionals. Maurizio Dallocchio (Milan, Italy) former Dean of the leading Italian business school Bocconi (Milan) and Lehman Brothers Chair of Corporate Finance. He is also a board member of several listed and unlisted companies and is one of the most distinguished Italian authorities on finance. Antonio Salvi (Milan, Italy) is an Assistant Professor of Finance at Bocconi and the University of Venice where he teaches Corporate Finance. His areas of research cover cost of capital, structure of debt finance and corporate governance.