Outline of the Text

Part I: Overview
Part II: Value and Capital Budgeting
CORPORATE FINANCE Part III: Risk
Part IV: Capital Structure and Dividend Policy
7th Edition
Part V: Long-Term Financing
Stephen A. Ross Part VI: Options, Futures, and Corporate Finance
Randolph W. Westerfield Part VII: Short-Term Finance
Jeffrey F. Jaffe
Part VIII: Special Topics
Presented by
Dan Liang

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Table of Contents Table of Contents (continued)

I: Chapter 1 Introduction to Corporate Finance Chapter 15 Capital Structure: Basic Concepts
Chapter 2 Accounting Statements and Cash Flow Chapter 16 Capital Structure: Limits to the Use of Debt
Chapter 3 Financial Planning and Growth
Chapter 17 Valuation and Capital Budgeting for the Levered
II: Chapter 4 Net Present Value
Firm
Chapter 5 How to Value Bonds and Stocks
Chapter 6 Some Alternative Investment Rules Chapter 18 Dividends and Other Payouts
Chapter 7 Net Present Value and Capital Budgeting V: Chapter 19 Issuing Securities to the Public
Chapter 8 Risk Analysis, Real Options, and Capital Budgeting Chapter 20 Long-term Debt
III: Chapter 9 Capital Market Theory: an Overview Chapter 21 Leasing
Chapter 10Return and Risk: The Capital-Asset-Pricing Model (CAPM)
VI: Chapter 22 Options and Corporate Finance: Basic Concepts
Chapter 11An Alternative View of Risk and Return: The Arbitrage
Chapter 23 Options and Corporate Finance: Extensions and
Pricing Theory
Chapter 12 Risk, Cost of Capital, and Capital Budgeting Applications
IV: Chapter 13 Corporate-Financing Decisions and Efficient Capital Markets Chapter 24 Warrants and Convertibles
Chapter 14 Long-term Financing: an Introduction Chapter 25 Derivatives and Hedging Risk

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 T1.1 Chapter Outline
Table of Contents (continued)
VII: Chapter 26 Short-term Finance and Planning Chapter 1
Chapter 27 Cash Management Introduction to Corporate Finance
Chapter 28 Credit Management
Chapter Organization
VIII: Chapter 29 Mergers and Acquisitions
Chapter 30 Financial Distress „ 1.1 What is Corporate Finance
Chapter 31 International Corporate Finance
„ 1.2 Corporate Securities as Contingent Claims

„ 1.3 Forms of Business Organization

„ 1.4 Goals of Corporate Firm

„ 1.5 Financial Markets

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T1.2 The Four Basic Areas of Finance T1.2 The Four Basic Areas of Finance - Corporate Finance

The Four Basic Areas of Finance Corporate Finance

„ Corporate Finance „ Long-term investments
‹ Capital Budgeting

„ Long-term financing
„ Investments
‹ Capital Structure

„ Short-term financing
„ Financial Institutions ‹ Working Capital Management

„ Risk management
‹ Derivative securities
„ International Finance

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T1.3 What is Corporate Finance T1.4 Corporate Securities as Contingent Claims on Total Firm Value

„ What investment opportunity should the firm take? „ Suppose that one of S possible state of nature can occur
‹ Fixed asset investment
tomorrow. A contingent claim is a security that pays one dollar
in one state s only tomorrow. It is a random variable X (s),
‹ Capital budgeting (capital expenditures): the process of s∈S, representing a payoff at time 1.
making and managing expenditures on long-lived assets.
„ Debt and equity as contingent claims.
„ How can the firm raise cash for required capital
expenditures?
‹ Capital Structure

„ How should short-term operating cash flows be

managed?
‹ Net working capital

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T1.5 A Simplified Organizational Chart (Figure 1.3) T1.6 Forms of Business Organization

„ Organizational Forms
‹ Sole Proprietorship
‹ Partnership
General Partnership / Limited Partnership

‹ Corporation：a distinct legal entity

Limited Liability, ease of ownership transfer, and perpetual
succession

„ Legal Considerations
How do owners’ roles differ across organizational forms?

„ Economic Considerations
Why are corporations generally larger than other forms of
business?
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T1.7 Goals of the Corporate Firm
The Goal of Financial Management
„ What are firm decision-makers hired to do?
“General Motors is not in the business of making automobiles.
General Motors is in the business of making money.”
T1.8 The Agency Problem
The Agency Problem and Control of the Firm
„ Agency Relationships and Management Goals
„ Do managers Act in the Shareholders’ interests?

--Alfred P. Sloan Agency costs

„ Possible goals
„ Mechanisms to ensure Managers are acting in
„ Three “equivalent” goals of financial management:
shareholders’ interest
Maximize share price Managerial compensation Proxy Contest
Board of directors Institutional Investors
Maximize shareholder wealth
Takeover activity
Maximize firm value
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T1.9 Financial Markets T1.10 Cash Flows Between the Firm and the Financial Markets

Financial Markets
„ What is the role of financial markets in corporate
finance?
Cash flows to and from the firm
Money markets and capital markets
Primary versus Secondary markets

„ How do financial markets benefit society?

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