Richard Brealey – Principles of Corporate Finance (11th edition)

Автор: Richard Brealey
Название книги: Principles of Corporate Finance (11th edition)
Формат: PDF
Жанр: Экономические дисциплины
Страницы: 1005
Качество: Изначально компьютерное, E-book

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This book describes the theory and practice of corporate
finance. We hardly need to explain why financial managers
have to master the practical aspects of their job, but we
should spell out why down-to-earth managers need to bother
with theory.
Managers learn from experience how to cope with routine
problems. But the best managers are also able to respond to
change. To do so you need more than time-honored rules of
thumb; you must understand why companies and financial
markets behave the way they do. In other words, you need a
theory of finance.
Does that sound intimidating? It shouldn’t. Good theory
helps you to grasp what is going on in the world around you.
It helps you to ask the right questions when times change and
new problems need to be analyzed. It also tells you which
things you do not need to worry about. Throughout this book
we show how managers use financial theory to solve practical
problems.
Of course, the theory presented in this book is not perfect
and complete—no theory is. There are some famous controversies
where financial economists cannot agree. We have not
glossed over these disagreements. We set out the arguments for
each side and tell you where we stand.
Much of this book is concerned with understanding what
financial managers do and why. But we also say what financial
managers should do to increase company value. Where
theory suggests that financial managers are making mistakes,
we say so, while admitting that there may be hidden reasons
for their actions. In brief, we have tried to be fair but to pull
no punches.
This book may be your first view of the world of modern
finance theory. If so, you will read first for new ideas, for an
understanding of how finance theory translates into practice,
and occasionally, we hope, for entertainment. But eventually
you will be in a position to make financial decisions, not just
study them. At that point you can turn to this book as a reference
and guide.
◗ Changes in the Eleventh Edition
We are proud of the success of previous editions of Principles,
and we have done our best to make the eleventh edition even
better.
What is new in the eleventh edition? Of course, a large part
of the changes in any edition consist of adding some updated
data here and a new example there. However, we have rewritten
and refreshed several basic chapters. Content remains
much the same, but we think that the revised chapters are simpler
and flow better.
• Chapter 1 has grown over the years as major new developments
in the financial world seem to demand some
reference and comment. In this edition we have sought to
make the chapter a more focused introduction to corporate
finance. It concentrates on the decisions that corporations
need to make and the financial objectives that govern these
decisions. It also introduces five basic themes that return
again and again throughout the book.
• Chapter 3 introduces bond valuation. We rewrote and
simplified some of the material, such as the discussion of
duration. The last section of the chapter includes an introduction
to default risk. The tribulations of the eurozone
and the default by the Greek government on its bonds are
reminders that default is not just a concern for holders of
corporate debt. So we discuss briefly the risk of default for
both corporate and sovereign borrowers. (We discuss corporate
debt and default risk in more detail in Chapter 23. )
• Chapter 4 is concerned with the valuation of common
stocks. We start by explaining how individual stocks are valued
and go on to look at the problem of valuing the entire
company. These days many firms do not pay dividends and
use excess cash to repurchase stock. In this edition we provide
more guidance on valuing these companies.
• Chapter 6 explains how to calculate the present value of
new investments. We cover the same material in this chapter
as in previous editions, but we include a longer discussion
of the differences between cash flows and accounting
profits. We think that this will provide readers with a
clearer understanding of how to derive cash-flow forecasts.
• The financial manager spends a large part of his time interacting
with financial institutions and markets. In Chapter
14 we expand our discussion of these institutions. We
describe the main forms of institutions, we look at their
economic role, and we use the crisis of 2007–2009 to
review what happens when financial institutions and markets
cease to function well.
• We substantially rewrote Chapter 16, which looks at payout
policy. We review both how much companies should pay out
and whether they should do so by means of a dividend payment
or stock repurchase. We also return to an issue that we
introduced in Chapter 4 and look in more detail at how to
value a company when repurchases are important.
• Chapter 24, which previously looked at the different kinds
of long-term debt, now also looks at short-term debt such
as bank loans. Many of the issues about debt design
such as the role of covenants apply to both short- and longterm
debt.
• In earlier editions we discussed bank debt in the chapter
on working capital management. One advantage of moving
this discussion to Chapter 24 is that we have the luxury in
Chapter 30 of being able to look more broadly at working
capital. For example, we now include a discussion of the
cash conversion cycle and show how it is affected by management
decisions.
The first edition of this book appeared in 1981. Basic principles
are the same now as then, but the last three decades
have also generated important changes in theory and practice.
Research in finance has focused less on what financial managers
should do, and more on understanding and interpreting
what they do in practice. In other words, finance has become
more positive and less normative. For example, we now have
careful surveys of firms’ capital investment practices and payout
and financing policies. We review these surveys and look
at how they cast light on competing theories.
Many financial decisions seem less clear-cut than they were
20 or 30 years ago. It no longer makes sense to ask whether high
payouts are always good or always bad, or whether companies
should always borrow less or more. The right answer is, “It
depends.” Therefore we set out pros and cons of different policies.
We ask, “What questions should the financial manager ask when
setting financial policy?” You will, for example, see this shift in
emphasis when we discuss payout decisions in Chapter 16.
This edition builds on other changes from earlier editions.
We recognize that financial managers work more than ever in
an international environment and therefore need to be familiar
with international differences in financial management and
in financial markets and institutions. Chapters 27 (Managing
International Risks) and 33 (Governance and Corporate Control
around the World) are exclusively devoted to international
issues. We have also found more and more opportunities in
other chapters to draw cross-border comparisons or use non-
U.S. examples. We hope that this material will both provide a
better understanding of the wider financial environment and
be useful to our many readers around the world.
As every first-grader knows, it is easier to add than to subtract.
To make way for new topics we needed to make some
judicious pruning. We will not tell you where we cut out material,
because we hope that the deletions will be invisible.
The biggest change in this edition
is not to the printed text but to the
Beyond the Page digital extensions
and applications (see Pedagogical
Features, below). These pieces are an
integral part of the e-versions of the
book, but they are also easily accessible
via the Web using the QR codes
and shortcut URLs provided. They
provide additional examples, applications,
spreadsheet programs, and opportunities to explore topics
in more depth.
The QR codes are easy to use. First, use your smartphone to
download any QR-enabled barcode reader from your provider’s
marketplace. Focus your smartphone’s camera on any code in
the book, and you’ll be able to access the online chapter content
instantly. Try the code above now Additional examples include:
• Chapter 2 Do you need to learn how to use a financial
calculator? The “Beyond the Page” financial calculator
application shows how to do so.
• Chapter 3 Would you like to calculate a bond’s duration,
see how it predicts the effect of small interest rate changes
on bond price, calculate the duration of a common stock,
or learn how to adjust for convexity? The duration application
for Figure 3.2 allows you to do so.
• Chapter 9 How about measuring the betas of the Fama-
French three-factor model for U.S. stocks? The “Beyond
the Page” beta estimation application does this.
• Chapter 15 There was not space in the chapter to include
a real IPO prospectus, but you can go “Beyond the Page” to
learn more.
• Chapter 19 The book briefly describes the flow-to-equity
method for valuing businesses, but using the method
can be tricky. We provide an application that guides you
through the procedure.
• Chapter 20 The Black-Scholes “Beyond the Page” application
provides an option calculator. It also shows how to
estimate the option’s sensitivity to changes in the inputs.
• Chapter 28 Would you like to view the most recent
financial statements for different U.S. companies and calculate
their financial ratios? There is an application that
will do this for you.
We believe that the opportunity to add additional content and
applications such as these will increasingly widen the type of
material that can be made available and help the reader to
decide how deeply he or she wishes to explore a topic.