Corporate Finance, 3ed, ISV

Robert Parrino, David Kidwell, Thomas Bates, Peter Moles

ISBN: 9788126557011

828 pages

eBook also available for institutional users 

INR 929


This book by Robert Parrino, David Kidwell and Thomas Bates develops the fundamental concepts underlying corporate finance in an intuitive manner while maintaining a strong emphasis on developing computational skills. The authors believe that students who understand the intuition underlying the basic concepts of finance are better able to develop the critical judgments necessary to apply financial tools in real decision-making situations. The Third Edition offers a level of rigor that is appropriate for both business and finance majors and presents the content in a manner that all students find accessible and engaging.

1 The Financial Manager and the Firm

1.1 The Role of the Financial Manager  

1.2 Forms of Business Organisation  

1.3 Managing the Financial Function

1.4 The Goal of the Firm

1.5 Agency Conflicts: Separation of Ownership and Control

1.6 The Importance of Ethics in Business


2 The Financial Environment and the Level of Interest Rates

2.1 The Financial System

2.2 Direct Financing

2.3 Types of Financial Markets

2.4 Market Efficiency

2.5 The Stock Market

2.6 Financial Institutions and Indirect Financing

2.7 The Determinants of Interest Rate Levels


3 Financial Statements, Cash Flows and Taxes

3.1 Financial Statements and Accounting Principles

3.2 The Statement of Financial Position (Balance Sheet)

3.3 Market Value versus Book Value

3.4 The Income Statement and the Statement of Retained Earnings

3.5 Cash Flows

3.6 Tying the Financial Statements Together

3.7 International Accounting Issues

3.8 Corporate Income Tax


4 Analysing Financial Statements

4.1 Background for Financial Statement Analysis

4.2 Common-Size Financial Statements

4.3 Financial Statement Analysis

4.4 The DuPont System: A Diagnostic Tool

4.5 Selecting a Benchmark

4.6 Using Financial Ratios


5 The Time Value of Money

5.1 The Time Value of Money

5.2 Future Value and Compounding

5.3 Present Value and Discounting

5.4 Additional Concepts and Applications


6 Discounted Cash Flows and Valuation

6.1 Multiple Cash Flows

6.2 Level Cash Flows: Annuities and Perpetuities

6.3 Cash Flows That Grow at a Constant Rate

6.4 The Effective Annual Interest Rate


7 Risk and Return

7.1 Risk and Return

7.2 Quantitative Measures of Return

7.3 The Variance and Standard Deviation as Measures of Risk

7.4 Risk and Diversification

7.5 Systematic Risk

7.6 Compensation for Bearing Systematic Risk

7.7 The Capital Asset Pricing Model


8 Bond Valuation and the Structure of Interest Rates

8.1 Corporate Bonds

8.2 Bond Valuation

8.3 Bond Yields

8.4 Interest Rate Risk

8.5 The Structure of Interest Rates


9 Share Valuation

9.1 The Market for Shares

9.2 Valuing Ordinary Shares

9.3 Share Valuation: Some Simplifying Assumptions

9.4 Valuing Preference Shares


10 The Fundamentals of Capital Budgeting

10.1 An Introduction to Capital Budgeting

10.2 Net Present Value

10.3 The Payback Period

10.4 The Accounting Rate of Return

10.5 Internal Rate of Return

10.6 Capital Budgeting in Practice


11 Cash Flows and Capital Budgeting

11.1 Calculating Project Cash Flows

11.2 Estimating Cash Flows in Practice

11.3 Forecasting Free Cash Flows

11.4 Special Cases


12 Evaluating Project Economics and Capital Rationing

12.1 Variable Costs, Fixed Costs and Project Risk

12.2 Calculating Operating Leverage

12.3 Break-Even Analysis

12.4 Risk Analysis

12.5 Investment Decisions with Capital Rationing


13 The Cost of Capital

13.1 The Firm's Overall Cost of Capital

13.2 The Cost of Debt

13.3 The Cost of Equity

13.4 Using the WACC in Practice


14 Working Capital Management

14.1 Working Capital Basics

14.2 The Operating and Cash Conversion Cycles

14.3 Working Capital Investment Strategies

14.4 Accounts Receivable

14.5 Inventory Management

14.6 Cash Management and Budgeting

14.7 Financing Working Capital


15 How Firms Raise Capital

15.1 Bootstrapping

15.2 Venture Capital

15.3 Initial Public Offering

15.4 IPO Pricing and Cost

15.5 Seasoned Offerings by a Public Company

15.6 Private Markets and Bank Loans


16 Capital Structure Policy

16.1 Capital Structure and Firm Value

16.2 The Benefits and Costs of Using Debt

16.3 Two Theories of Capital Structure

16.4 Practical Considerations in Choosing a Capital Structure


17 Dividends, Share Repurchases and Payout Policy

17.1 Dividends

17.2 Share Repurchases

17.3 Dividends and Firm Value

17.4 Share Dividends and Share Splits

17.5 Setting a Dividend Policy


18 Business Formation, Growth and Valuation

18.1 Starting a Business

18.2 The Role of the Business Plan

18.3 Valuing a Business

18.4 Important Issues in Valuation


19 Financial Planning and Forecasting

19.1 Financial Planning

19.2 Financial Planning Models

19.3 A Better Financial Planning Model

19.4 Beyond the Basic Planning Models

19.5 Managing and Financing Growth


20 Corporate Risk Management

20.1 Why Companies Manage Corporate Risks

20.2 Managing Operational, Business and Financial Risks

20.3 Forwards and Futures

20.4 Swaps

20.5 Financial Options

20.6 Option Valuation

20.7 Real Options

20.8 Agency Costs


21 International Financial Management

21.1 Introduction to International Finance Management

21.2 Foreign Exchange Markets

21.3 Country Risk

21.4 Cost of Capital for International Projects

21.5 International Capital Budgeting

21.6 Islamic Finance



Subject Index

Company Index


Appendix A: Present Value and Future Value Tables

Appendix B: Solutions to Selected Questions and Problems

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