The Basics of Finance: An Introduction to Financial Markets, Business Finance, and Portfolio Management (Frank J. Fabozzi Series)

CHAPTER 1
What Is Finance? 1
Capital Markets and Capital Market Theory 3
Financial Management 4
Investment Management 6
Organization of This Book 7
The Bottom Line 8
Questions 8
PART ONE
The Financial System
CHAPTER 2
Financial Instruments, Markets, and Intermediaries 13
The Financial System 13
The Role of Financial Markets 17
The Role of Financial Intermediaries 18
Types of Financial Markets 24
The Bottom Line 33
Questions 33
CHAPTER 3
The Financial System’s Cast of Characters 37
Domestic Nonfinancial Sectors 39
Nonfinancial Businesses 42
Domestic Financial Sectors 43
Foreign Investors 60
The Bottom Line 60
Questions 61
PART TWO
Financial Management
CHAPTER 4
Financial Statements 65
Accounting Principles: What Are They? 66
The Basic Financial Statements 67
How Are the Statements Related? 81
Why Bother about the Footnotes? 82
Accounting Flexibility 83
U.S. Accounting vs. Outside of the U.S. 83
The Bottom Line 84
Solutions to Try It! Problems 85
Questions 86
CHAPTER 5
Business Finance 89
Forms of Business Enterprise 90
The Objective of Financial Management 97
The Bottom Line 104
Solutions to Try It! Problems 105
Questions 105
CHAPTER 6
Financial Strategy and Financial Planning 109
Strategy and Value 110
The Budgeting Process 115
Budgeting 119
Performance Evaluation 120
Strategy and Value Creation 124
The Bottom Line 128
Questions 129
CHAPTER 7
Dividend and Dividend Policies 133
Dividends 134
Stock Distributions 137
Dividend Policies 141
Stock Repurchases 147
The Bottom Line 150
Solutions to Try It! Problems 151
Questions 151
CHAPTER 8
The Corporate Financing Decision 155
Debt vs. Equity 156
Financial Leverage and Risk 164
Financial Distress 168
The Cost of Capital 171
Optimal Capital Structure: Theory and Practice 175
The Bottom Line 180
Solutions to Try It! Problems 182
Questions 183
CHAPTER 9
Financial Risk Management 185
The Definition of Risk 185
Enterprise Risk Management 188
Managing Risks 193
The Bottom Line 197
Questions 198
PART THREE
Valuation and Analytical Tools
CHAPTER 10
The Math of Finance 201
Why the Time Value of Money? 201
Calculating the Future Value 203
Calculating a Present Value 213
Determining the Unknown Interest Rate 216
The Time Value of a Series of Cash Flows 217
Annuities 221
Loan Amortization 230
Interest Rates and Yields 232
The Bottom Line 238
Solutions to Try It! Problems 239
Questions 240
CHAPTER 11
Financial Ratio Analysis 243
Classifying Financial Ratios 244
Liquidity 247
Profitability Ratios 253
Activity Ratios 255
Financial Leverage 258
Return on Investment 262
The DuPont System 263
Common-Size Analysis 266
Using Financial Ratio Analysis 268
The Bottom Line 270
Solutions to Try It! Problems 270
Questions 271
CHAPTER 12
Cash Flow Analysis 275
Difficulties with Measuring Cash Flow 275
Free Cash Flow 283
Usefulness of Cash Flows Analysis 288
Ratio Analysis 290
The Bottom Line 292
Solutions to Try It! Problems 293
Questions 293
CHAPTER 13
Capital Budgeting 295
Investment Decisions and Owners’ Wealth 296
The Capital Budgeting Process 298
Determining Cash Flows from Investments 303
Capital Budgeting Techniques 321
The Bottom Line 344
Solutions to Try It! Problems 344
Questions 345
CHAPTER 14
Derivatives for Controlling Risk 349
Futures and Forward Contracts 350
Options 363
Swaps 376
The Bottom Line 379
Appendix: Black-Scholes Option Pricing Model 380
Solutions to Try It! Problems 383
Questions 385
PART FOUR
Investment Management
CHAPTER 15
Investment Management 389
Setting Investment Objectives 391
Establishing an Investment Policy 393
Constructing and Monitoring a Portfolio 400
Measuring and Evaluating Performance 401
The Bottom Line 410
Solutions to Try It! Problems 411
Questions 412
CHAPTER 16
The Theory of Portfolio Selection 415
Some Basic Concepts 416
Estimating a Portfolio’s Expected Return 418
Measuring Portfolio Risk 421
Portfolio Diversification 426
Choosing a Portfolio of Risky Assets 428
Issues in the Theory of Portfolio Selection 434
Behavioral Finance and Portfolio Theory 438
The Bottom Line 441
Solutions to Try It! Problems 442
Questions 443
CHAPTER 17
Asset Pricing Theory 445
Characteristics of an Asset Pricing Model 446
The Capital Asset Pricing Model 447
The Arbitrage Pricing Theory Model 461
Some Principles to Take Away 465
The Bottom Line 466
Solutions to Try It! Problems 467
Questions 467
CHAPTER 18
The Structure of Interest Rates 469
The Base Interest Rate 470
The Term Structure of Interest Rates 476
Term Structure of Interest Rates Theories 484
Swap Rate Yield Curve 486
The Bottom Line 487
Solutions to Try It! problems 488
Questions 489
CHAPTER 19
Valuing Common Stock 491
Discounted Cash Flow Models 491
Relative Valuation Methods 503
The Bottom Line 509
Solutions to Try It! Problems 510
Questions 511
CHAPTER 20
Valuing Bonds 513
Valuing a Bond 514
Conventional Yield Measures 524
Valuing Bonds that Have Embedded Options 532
The Bottom Line 538
Solutions to Try It! Problems 539
Questions 540
Glossary 543
About the Authors 571
Index 573