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### New Sixth Edition Now Available!

** Lectures in Corporate Finance** is written by the belief “Less is more." That is, less topics taught in greater detail will produce more understanding, more emphasis on basic skills, and more student excitement and curiosity about the field of finance.

Essentially a workbook and textbook combined into one, ** Lectures in Corporate Finance** rigorously covers finance theory and practice while supplementing the material with numerous interactive problems with provided answers and solutions.

One of the few books written specifically for an undergraduate introductory course in corporate finance, ** Lectures in Corporate Finance**:

- Contains six topics that most undergraduate instructors identified as most important: financial statements and financial reporting, the identification (from accounting data) and analysis of cash flow, time value of money, stock and bond valuation, the basic principles of risk and return, and capital budgeting.
- Is affordable and written in a format and language that resonates with students.
- Believes the best way to learn finance is to do finance! The package includes numerous problems (with answers in the appendix) to test comprehension of concepts and theories presented.
- Is classroom tested! The material has been used successfully for many years by 40+ instructors and 10,00 students in both physical and online formats.

**Chapter 1 Introduction and Overview**

1.1 The Exciting and Relevant World of Finance

1.2 The Mysterious World of Finance

1.3 Finance as a Field of Study

1.4 Forms of Business Organization

1.5 The Goal of Corporate Financial Management

1.6 The Relationship between Accounting and Finance

1.7 Value and the Importance of Cash

1.8 Careers in Finance

1.8.1 Finance Salaries

1.8.2 Careers/Jobs in Corporate Financial Management

1.8.3 Careers/Jobs in Investments

1.8.4 Careers/Jobs in Financial Markets and Institutions

1.9 Purpose and Organization of Text

QUESTIONS

**Chapter 2 Accounting Review: Income Statements and Balance Sheets**

2.1 Chapter Overview

2.2 The Income Statement

2.2.1 Summary

2.3 The Balance Sheet

2.3.1 Asset Accounts

2.3.2 Liability Accounts

2.3.3 Summary

2.4 The Importance of Accounting for Business Operations

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 3 The Flow of Funds and the Statement of Cash Flows**

3.1 Chapter Overview

3.2 Net Profit versus Net Cash Flow

3.2.1 Cash Is King

3.3 The Flow of Funds

3.4 Sources and Uses of Funds

3.5 The Statement of Cash Flows

3.5.1 Cash Flows from Operating Activities

3.5.2 Cash Flows from Investing Activities

3.5.3 Cash Flow~ from Financing Activities

3.6 Constructing a Statement of Cash Flows: A Simple Example

3.7 Important Statement of Cash Flow Relationships to Remember

3.7.1 Key Equations

3.7.2 Illustration and Importance of Equation 1

3.7.3 Illustration and Importance of Equation 2

3.7.4 Illustration and Importance of Equation 3

3.8 Analyzing the Statement of Cash Flows

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 4 Financial Statement Analysis**

4.1 Chapter Introduction and Overview

4.2 The Objective of Financial Statement Analysis

4.3 Financial Statement Fraud and Earnings Management

4.3.1 Playing the Resume Game: An Analogy

4.3.2 The Field of Forensic Accounting

4.4 Tools of Financial Statement Analysis

4.4.1 Common Size Financial Statements

4.4.2 Financial Ratios

4.5 Learn by Doing

4.5.1 Direct Ratio Calculations

4.5.2 Ratio Relationship Problems

4.6 Analyzing Financial Ratios

4.7 Limitations of Ratios

4.8 Summary

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 5 Strategic Financial Management**

5.1 Chapter Introduction and Overview

5.2 Working Capital Management

5.3 Cash Budgets

5.4 Pro Forma Financial Statements

5.5 COFFY'S Coffee Shop: A Simple Example

5.5.1 Determining Total Outside Funds Needed

5.5.2 Determining Long-Term Outside Funds Needed

5.5.3 Determining New Common Stock Funding Needed

5.6 Summary

5.7 Section Summary

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 6 Time Value of Money: The Basic Concepts**

6.1 Chapter Introduction and Overview

6.2 The Math of Time Value of Money

6.3 Interest Rates and the Inflation Adjustment

6.4 Calculators and the Definition of Time in TVM

6.4.1 Financial Calculators

6.4.2 Definition of Time

6.5 Present and Future Values: Single Period Lump Sums

6.6 Present and Future Values: Two Periods of Cash Flows

6.6.1 Future Value

6.6.2 Present Value

6.7 Chapter Summary and Looking Forward

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 7 Time Value of Money: Advanced Topics**

7.1 Chapter Introduction and Overview

7.2 The Basic Approach

7.3 The Present Value of a Perpetuity

7.4 The Present Value of an Annuity

7.5 Time Value Calculations with a Financial Calculator

7.5.1 The Basics

7.6 Present and Future Values of Single Cash Flows

7.7 Present and Future Values of Annuities

7.7.1 Annual Annuities

7.7.2 Non-Annual Cash Flows

7.8 Special Topics in Time Value

7.8.1 Compounding Period Is Less Than One Year

7.8.2 Continuous Compounding

7.8.3 Annuities Valuation with Payments at the Beginning of the Period

7.8.4 Loan Amortization

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 8 Financial Securities**

8.1 Chapter Introduction and Overview

8.2 What Is a Financial Security?

8.3 Common Financial Securities

8.3.1 Debt Securities

8.3.2 Equity Securities

8.3.3 Preferred Stock

8.4 Overview of Financial Securities Markets

8.4.1 Types of Markets

8.4.2 How Companies Issue New Securities in the Primary Market

8.4.3 How Securities Trade in the Secondary Market

8.4.4 Market Indices

8.5 The Principles of Risk and Return

8.5.1 Risk and Return

8.5.2 Risk Premium for Fixed Income Securities

8.5.3 Risk Premium for Equity Securities

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 9 Valuation of Bonds and Stocks and the cost of Capital**

9.1 Chapter Introduction and Overview

9.2 The Cost of Capital

9.3 Bond Valuation

9.3.1 Valuation of Consols

9.3.2 Valuation of Zero-Coupon Bonds

9.3.3 Valuation of Fixed-Coupon Bonds

9.4 Preferred Stock Valuation

9.5 Valuation of Common Stock

9.5.1 Assuming a Constant Dividend Stream

9.5.2 Assuming That Dividends Grow at a Constant Growth Rate

9.5.3 Non-Constant Dividend Growth

ASSIGNMENTS 27

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 10 Basics of Capital Budgeting**

10.1 Chapter Introduction and Overview

10.2 Capital Budgeting Techniques

10.3 Using the Financial Calculator for NPV and IRR

10.3.1 Net Present Value (NPV)

10.3.2 Internal Rate of Return (IRR)

10.3.3 Compute Project NPV

10.3.4 Compute Project IRR

10.4 Some Warnings on the Use of the IRR Criterion

10.5 Independent versus Mutually Exclusive Projects

10.6 The Payback Period Criterion

10.7 Estimating the Weighted Average Cost of Capital

10.8 Recap

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 11 Advanced Topics in Capital Budgeting**

11.1 Chapter Introduction and Overview

11.2 Project Discount Rates and Relevant Cash Flows

11.3 A Capital Budgeting Example

11.4 Equivalent Annual Series

11.5 Concluding Thoughts and Remarks

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Appendix A: Answers to In-Text Problems**

Index

Index

### New Sixth Edition Now Available!

** Lectures in Corporate Finance** is written by the belief “Less is more." That is, less topics taught in greater detail will produce more understanding, more emphasis on basic skills, and more student excitement and curiosity about the field of finance.

Essentially a workbook and textbook combined into one, ** Lectures in Corporate Finance** rigorously covers finance theory and practice while supplementing the material with numerous interactive problems with provided answers and solutions.

One of the few books written specifically for an undergraduate introductory course in corporate finance, ** Lectures in Corporate Finance**:

- Contains six topics that most undergraduate instructors identified as most important: financial statements and financial reporting, the identification (from accounting data) and analysis of cash flow, time value of money, stock and bond valuation, the basic principles of risk and return, and capital budgeting.
- Is affordable and written in a format and language that resonates with students.
- Believes the best way to learn finance is to do finance! The package includes numerous problems (with answers in the appendix) to test comprehension of concepts and theories presented.
- Is classroom tested! The material has been used successfully for many years by 40+ instructors and 10,00 students in both physical and online formats.

**Chapter 1 Introduction and Overview**

1.1 The Exciting and Relevant World of Finance

1.2 The Mysterious World of Finance

1.3 Finance as a Field of Study

1.4 Forms of Business Organization

1.5 The Goal of Corporate Financial Management

1.6 The Relationship between Accounting and Finance

1.7 Value and the Importance of Cash

1.8 Careers in Finance

1.8.1 Finance Salaries

1.8.2 Careers/Jobs in Corporate Financial Management

1.8.3 Careers/Jobs in Investments

1.8.4 Careers/Jobs in Financial Markets and Institutions

1.9 Purpose and Organization of Text

QUESTIONS

**Chapter 2 Accounting Review: Income Statements and Balance Sheets**

2.1 Chapter Overview

2.2 The Income Statement

2.2.1 Summary

2.3 The Balance Sheet

2.3.1 Asset Accounts

2.3.2 Liability Accounts

2.3.3 Summary

2.4 The Importance of Accounting for Business Operations

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 3 The Flow of Funds and the Statement of Cash Flows**

3.1 Chapter Overview

3.2 Net Profit versus Net Cash Flow

3.2.1 Cash Is King

3.3 The Flow of Funds

3.4 Sources and Uses of Funds

3.5 The Statement of Cash Flows

3.5.1 Cash Flows from Operating Activities

3.5.2 Cash Flows from Investing Activities

3.5.3 Cash Flow~ from Financing Activities

3.6 Constructing a Statement of Cash Flows: A Simple Example

3.7 Important Statement of Cash Flow Relationships to Remember

3.7.1 Key Equations

3.7.2 Illustration and Importance of Equation 1

3.7.3 Illustration and Importance of Equation 2

3.7.4 Illustration and Importance of Equation 3

3.8 Analyzing the Statement of Cash Flows

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 4 Financial Statement Analysis**

4.1 Chapter Introduction and Overview

4.2 The Objective of Financial Statement Analysis

4.3 Financial Statement Fraud and Earnings Management

4.3.1 Playing the Resume Game: An Analogy

4.3.2 The Field of Forensic Accounting

4.4 Tools of Financial Statement Analysis

4.4.1 Common Size Financial Statements

4.4.2 Financial Ratios

4.5 Learn by Doing

4.5.1 Direct Ratio Calculations

4.5.2 Ratio Relationship Problems

4.6 Analyzing Financial Ratios

4.7 Limitations of Ratios

4.8 Summary

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 5 Strategic Financial Management**

5.1 Chapter Introduction and Overview

5.2 Working Capital Management

5.3 Cash Budgets

5.4 Pro Forma Financial Statements

5.5 COFFY'S Coffee Shop: A Simple Example

5.5.1 Determining Total Outside Funds Needed

5.5.2 Determining Long-Term Outside Funds Needed

5.5.3 Determining New Common Stock Funding Needed

5.6 Summary

5.7 Section Summary

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 6 Time Value of Money: The Basic Concepts**

6.1 Chapter Introduction and Overview

6.2 The Math of Time Value of Money

6.3 Interest Rates and the Inflation Adjustment

6.4 Calculators and the Definition of Time in TVM

6.4.1 Financial Calculators

6.4.2 Definition of Time

6.5 Present and Future Values: Single Period Lump Sums

6.6 Present and Future Values: Two Periods of Cash Flows

6.6.1 Future Value

6.6.2 Present Value

6.7 Chapter Summary and Looking Forward

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 7 Time Value of Money: Advanced Topics**

7.1 Chapter Introduction and Overview

7.2 The Basic Approach

7.3 The Present Value of a Perpetuity

7.4 The Present Value of an Annuity

7.5 Time Value Calculations with a Financial Calculator

7.5.1 The Basics

7.6 Present and Future Values of Single Cash Flows

7.7 Present and Future Values of Annuities

7.7.1 Annual Annuities

7.7.2 Non-Annual Cash Flows

7.8 Special Topics in Time Value

7.8.1 Compounding Period Is Less Than One Year

7.8.2 Continuous Compounding

7.8.3 Annuities Valuation with Payments at the Beginning of the Period

7.8.4 Loan Amortization

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 8 Financial Securities**

8.1 Chapter Introduction and Overview

8.2 What Is a Financial Security?

8.3 Common Financial Securities

8.3.1 Debt Securities

8.3.2 Equity Securities

8.3.3 Preferred Stock

8.4 Overview of Financial Securities Markets

8.4.1 Types of Markets

8.4.2 How Companies Issue New Securities in the Primary Market

8.4.3 How Securities Trade in the Secondary Market

8.4.4 Market Indices

8.5 The Principles of Risk and Return

8.5.1 Risk and Return

8.5.2 Risk Premium for Fixed Income Securities

8.5.3 Risk Premium for Equity Securities

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 9 Valuation of Bonds and Stocks and the cost of Capital**

9.1 Chapter Introduction and Overview

9.2 The Cost of Capital

9.3 Bond Valuation

9.3.1 Valuation of Consols

9.3.2 Valuation of Zero-Coupon Bonds

9.3.3 Valuation of Fixed-Coupon Bonds

9.4 Preferred Stock Valuation

9.5 Valuation of Common Stock

9.5.1 Assuming a Constant Dividend Stream

9.5.2 Assuming That Dividends Grow at a Constant Growth Rate

9.5.3 Non-Constant Dividend Growth

ASSIGNMENTS 27

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 10 Basics of Capital Budgeting**

10.1 Chapter Introduction and Overview

10.2 Capital Budgeting Techniques

10.3 Using the Financial Calculator for NPV and IRR

10.3.1 Net Present Value (NPV)

10.3.2 Internal Rate of Return (IRR)

10.3.3 Compute Project NPV

10.3.4 Compute Project IRR

10.4 Some Warnings on the Use of the IRR Criterion

10.5 Independent versus Mutually Exclusive Projects

10.6 The Payback Period Criterion

10.7 Estimating the Weighted Average Cost of Capital

10.8 Recap

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Chapter 11 Advanced Topics in Capital Budgeting**

11.1 Chapter Introduction and Overview

11.2 Project Discount Rates and Relevant Cash Flows

11.3 A Capital Budgeting Example

11.4 Equivalent Annual Series

11.5 Concluding Thoughts and Remarks

ASSIGNMENTS

ADDITIONAL QUESTIONS AND PROBLEMS

**Appendix A: Answers to In-Text Problems**

Index

Index