INSEAD Library

Includes index

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Finance and Accounting for Nonfinancial Managers Contents I INTRODUCTION 1 The Scope and Nature of Financial Management 3 Evolution of Finance Function 3 Goals of Financial Management 4 Organization and Structure of the Book 5 Conclusion 6 Summary 7 2 The Tax Environment 11 Organizational Form and Taxes 11 Corporate Income Taxes 12 Personal Income Taxes 18 Subchapter S Corporations 20 Summary 20 II FINANCIAL ACCOUNTING FUNDAMENTALS 3 Introduction to Financial Statements 25 Objectives of Financial Accounting 25 The Auditor's Opinion 28 Basic Financial Reports--The Balance Sheet 30 Book Value of Securities 36 The Income Statement 38 Statement of Changes in Financial Position 40 Summary 44 4 Accounting--A Financial-Information System 46 The Accounting Process 46 The Accrual Concept 46 Double-Entry Accounting 49 The Accounting Cycle 55 Summary 60 5 Special Topics in Accounting 62 Changes in the Equity Account 62 Depreciation Accounting 64 Inventory Accounting 69 Accounting for Leases 73 Intercorporate Investments 74 Summary 75 III FINANCIAL ANALYSIS and CONTROL 6 Financial Statement Analysis 81 Objectives of Financial Statement Analysis 81 Ratio Analysis 82 Common-Size Statements 88 Sequence of Analysis 89 Case Study 90 Key Financial Ratios 91 Summary 97 7 Financial Forecasting and Cash Budgeting 99 Objectives of Financial Forecasting 99 Short-Term Forecasts and Cash Budgeting 99 Case Study 100 Long-Term Financial Planning 111 Summary 114 8 Breakeven Analysis for Profit Planning 116 Assumptions of Breakeven Analysis 116 Breakeven Applications 117 The Breakeven Technique 118 Breakeven Charts 121 Nonlinear Breakeven Analysis 125 Summary 126 IV WORKING CAPITAL DECISIONS 9 Working Capital Policy 131 Importance of Working Capital Management 131 Short-Term Versus Long-Terra Financing 132 Relative Magnitude of Working Capital Investment 137 Inventory-Control Policy 139 Credit Policy 139 Accounts-Payable-Payment Policy 140 Summary 142 10 Working Capital Management 144 Management of Cash and Marketable Securities 144 Accounts-Receivable Management 148 Inventory Management 150 Sources of Short-Term Financing 154 Summary 158 Appendix 10.1: Economie Order Quantity Mathematical Derivation 158 V LONG-TERM INVESTMENT DECISIONS 11 Mathematics of Compound Interest 165 Compound Interest 165 Present Value 169 Present Value of an Annuity 171 Compound Value of an Annuity 173 Application to Personal Decision Making 174 Summary 177 12 Capital Budgeting 179 Payback 179 Net Present Value 180 Internai Rate of Return 182 Profitability Index 184 Selection of Method 185 Dealing with Uncertainty 187 Case Study 188 Summary 190 13 Cost of Capital 192 Cost of Capital Defined 192 Marginal Cost and Capital Budgeting 194 Calculating the Average Cost of Capital 195 The Capital Asset Pricing Model 198 Capital-Strutture Management 199 Summary 201 VI LONG-TERM FINANCING DECISIONS 14 Sources and Forms of Long-Term Financing 207 The Money and Capital Markets 207 Intermediate and Long-Term Debt 208 Lease Financing 211 Preferred Stock 213 Common Stock 215 Dividend Policy 216 Summary 220 15 Valuation of Financial Assets 224 Capitalization-of-Income Method 224 Selecting Appropriate Capitalization Rates 224 Bond Valuation 227 Preferred-Stock Valuation 229 Common-Stock Valuation 230 Summary 235