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About the Author
Author's Acknowledgements
Open Touro Acknowledgements
Preface
1.1 Chapter One: Learning Outcomes
1.2 The Corporation
1.3 Business / Corporate Structure: The Management Organization
1.4 The Finance Function Within the Corporation
1.5 Capital Structure
1.6 Thinking Like an Economist: Abstraction
1.7 Abstraction: Absurd AND Necessary
1.8 Modes of Reasoning: Dialectical versus Analytic
1.9 Finance Style
2.1 Chapter Two: Learning Outcomes
2.2 The Finance in the Financial Statements
2.3 The Balance Sheet
2.4 Sample Bookkeeping Entries
2.5 Current Assets: Inventory and Accounts Receivable
2.6 Financial Claims Hierarchy
2.7 Interest Paid on Bonds and Dividends Paid on Stock
2.8 Bankruptcy
2.9 The Balance Sheet, Net Income, and the Common Shareholder
2.10 Corporate Goals
2.11 Words and Numbers (An Aside)
2.12 Chapter 2 Review Questions
3.1 Chapter Three: Learning Outcomes
3.2 The Income Statement
3.3 On Learning and Studying
3.4 Financial Statements: Interpretation
3.5 The Audit
3.6 Perpetual Inventory Accounting
3.7 Periodic Inventory Analysis: Ending Inventory and Cost of Goods Sold
3.8 Units to Numbers: FIFO and LIFO
3.9 Inventory Costing Calculations: A Closer Look at the COGS and Ending Inventory Computations
3.10 Inventory Accounting Issues: LIFO
3.11 LIFO Base Illustration
3.12 Accounting for Long-term Assets: Straight-Line Depreciation (For Reporting Purposes Only)
3.13 Accounting Entries for Depreciation
3.14 Accelerated Depreciation Methods: Sum-of-the-Years' Digits (For reporting purposes only)
3.15 Accelerated Depreciation Methods: Double/Declining Balance (For reporting purposes only)
3.16 Comparative Summary of Depreciation Methods
3.17 The Balance Sheet versus the Income Statement: A Summary
3.18 Chapter Three: Review Questions
4.1 Chapter Four: Learning Outcomes
4.2 Accounting versus Finance
4.3 Earnings Management: Accrual, Real, and Expectations Management
4.4 Business Ethics: Examples of Fraudulent Revenue Recognition
4.5 Business Ethics: Examples of Fraudulent Expense Recognition
4.6 Chapter 4: Review Questions
5.1 Chapter Five: Learning Outcomes
5.2 Financial Ratios and Forecasting
5.3 Financial Ratios
5.4 Longitudinal vs. Cross-sectional Analysis (Example)
5.5 Liquidity and Liquidity Ratios
5.6 The Income Statement versus the Balance Sheet
5.7 Accounts Receivable Aging Schedule
5.8 Solvency Ratios
6.1 Chapter Six: Learning Outcomes
6.2 Profitability, Return and Asset Turnover Ratios
6.3 The DuPont Model
6.4 What Does the Dupont Model Show Us?
6.5 Financial Ratios in Action
7.1 Chapter Seven: Learning Outcomes
7.2 Market Ratios
7.3 Earnings Retention and Growth
7.4 The P/BV (Price-to-Book Value) and P/E (Price-Earnings) Ratios
7.5 Ratio Analysis Exercise
7.6 Solution Template for Ratio Analysis Problem
7.7 Solution for Ratio Analysis Problem
7.8 Adjustments to Basic Financial Ratios for Companies That Have Preferred Stock
7.9 Illustration of Effect of Preferred Stock on Earnings Retention
7.10 Industry Data Benchmarks
7.11 Some Limitations of Financial Ratios
7.12 Chapters 5 - 7: Review Questions
8.1 Chapter Eight: Learning Outcomes
8.2 Pro Forma Financial Analysis: The Corporate Environment
8.3 Pro-Forma (Projected) Cash Flow Analysis
8.4 Incrementalism
8.5 Corporate Forecasting and Strategic Planning
8.6 Forecasting Solution
8.7 The Tax Effect of Depreciation
9.1 Chapter Nine: Learning Outcomes
9.2 Free Cash Flow
9.3 Free Cash Flow Exercises
9.4 External Funds Needed Formula (EFN)
9.5 Internal and External Funds (Summary)
9.6 The EFN Formula Explained
9.7 EFN Application
9.8 EFN Solution
9.9 Summary: The Fundamentals of Accounting and Financial Analysis
9.10 Chapters Eight & Nine: Review Questions
10.1 Chapter Ten: Learning Outcomes
10.2 The Time Value of Money and Interest
10.3 Interest-on-the-Interest: The Nature of Compound Interest
10.4 Some More Simple TVM Problems
10.5 Simple Future and Present Values (Formulas)
10.6 Compounding Frequency Assumption
10.7 Simple Future and Present Values: Continuous Compounding (Supplemental)
10.8 Characteristics of the Time Value of Money: FV and PV
10.9 Future and Present Value Factors (Multipliers)
10.10 A Word on Compounding Frequency and Annual Equivalent Rates
10.11 Interpolation
10.12 Interpolation Illustrated
10.13 Some TVM Practice Questions
10.14 The Volatility of the Time Value of Money
10.15 The First and Second Derivatives Illustrated
11.1 Chapter Eleven: Learning Outcomes
11.2 Annuities
11.3 The Derivation of (Ordinary) Annuity Factors
11.4 The Derivation of Annuity Factors (Solution)
11.5 Future and Present Annuity Values: The Nature of Their Cash Flows
11.6 Future and Present Annuity Factors: Mathematical Formulas
11.7 Characteristics of Annuity Factors: A Review
11.8 Annuities: Practice Problems
11.9 Annuities Due
11.10 Annuities Due (Solutions)
11.11 Adjustment from Ordinary Annuity to Annuity Due
11.12 Uneven Cash Flows
11.13 Uneven Cash Flows (Solutions)
11.14 Uneven Cash Flows (Practice Problem)
11.15 Uneven Cash Flows (Practice Problem Solutions)
11.16 Uneven Cash Flows: Another Self-Test Practice Problem
11.17 Solution to Another Uneven Cash Flow Practice Problem
11.18 Perpetuities: No-Growth Perpetuities
11.19 The “Law of Limits” and Perpetuities
11.20 Growth Perpetuities
11.21 Fractional Time Periods
11.22 Loans: The Conventional Mortgage
11.23 A Few Thoughts about Mortgages
11.24 Summary Comparison of 15- and 30-Year Mortgages
11.25 Personal Financial Planning Problem
11.26 Summary: The Time Value of Money
11.27 Chapters 10 - 11: Review Questions
12.1 Chapter Twelve: Learning Outcomes
12.2 Security Return: The Holding Period Return (Raw Calculation)
12.3 Valuation Premise
12.4 Fixed Income Securities: Bond Components and Valuation Formula
12.5 Fixed Income Securities: Dollar Price and Yield-to-Maturity
12.6 Bond Dollar Prices: Discount, Par, and Premium
12.7 The True Price of a Bond
13.1 Chapter Thirteen: Learning Outcomes
13.2 Interest Rates: Returns to Investors; Cost to the Corporation
13.3 Inside the Banker’s Brain
13.4 Fixed Income Risks
13.5 Interest Rate and Reinvestment Rate Risks
13.6 Credit Ratings
13.7 The Yield Curve
13.8 The Term Structure of Interest Rates: Four Yield Curve Theories
13.9 Credit Spreads
13.10 High Yield Securities: Junk Bonds and Other Speculative Securities
13.11 Summary: Interest Rates, the Corporation, and Financial Markets
14.1 Chapter Fourteen: Learning Outcomes
14.2 The Philosophy of Equity Valuation
14.3 Equity Valuation
14.4 The Dividend Discount Model (DDM): Fixed Dividend or No- Growth Version
14.5 The Dividend Discount Model (DDM): Constant Growth Version
14.6 Dividend Discount Model (DDM) (Problems)
14.7 Dividend Discount Model (Solutions)
14.8 What About Quarterly Dividends?
14.9 Components of the Dividend Discount Model
14.10 A Closer Look at Dividend Growth
14.11 Summary of DDM Variables' Sources
14.12 Value Prediction Problem
14.13 A Qualitative Look at The Discount Rate
14.14 Business Ethics: The Small Investor's Experience of Insider Trading
14.15 Capital Gains
14.16 Portfolio Return (Weighted Averages)
14.17 The Geometric Average Return: Multi-year Returns
14.18 Chapters 12-14: Review Questions
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Introduction to Financial Analysis Copyright © 2022 by Kenneth S. Bigel is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.