Strategic Financial Management

In a world of geo-political, social and economic uncertainty, Strategic Financial Management is under pressure. This book reviews the subject within the context of current events. Each chapter contains activities (with solutions) to test understanding at your own pace. Comprehensive, yet concise, the material is also presented logically as a guide to further study. First, the investment decision, which maximises net present value and shareholder wealth. Next, the finance decision, which allocates least-cost combinations of capital resources. Finally, the wealth decision, which examines how internal investment and financial decisions should be externally monitored by the market.

1. Financial Objectives and Shareholder Wealth
2. Wealth Creation and Value Added
3. The Investment and Finance Decision
4. Decision Structures and Corporate Governance
5. The Developing Finance Function
6. The Principles of Investment
7. Perfect Markets and the Separation Theorem
8. Summary and Conclusions
9. Selected References

1. The Role of Capital Budgeting
2. Liquidity, Profitability and Present Value
3. The Internal Rate of Return (IRR)
4. The Inadequacies of IRR and the Case for NPV
5. Summary and Conclusions

1. Ranking and Acceptance Under IRR and NPV
2. The Incremental IRR
3. Capital Rationing, Project Divisibility and NPV
4. Relevant Cash Flows and Working Capital
5. Capital Budgeting and Taxation
6. NPV and Purchasing Power Risk
7. Summary and Conclusions

1. Dysfunctional Risk Methodologies
2. Decision Trees, Sensitivity and Computers
3. Mean-Variance Methodology
4. Mean-Variance Analyses
5. The Mean-Variance Paradox
6. Certainty Equivalence and Investor Utility
7. Summary and Conclusions
8. Reference

1. The Capitalisation Concept
2. Single-Period Dividend Valuation
3. Finite Dividend Valuation
4. General Dividend Valuation
5. Constant Dividend Valuation
6. The Dividend Yield and Corporate Cost of Equity
7. Dividend Growth and the Cost of Equity
8. Capital Growth and the Cost of Equity
9. Growth Estimates and the Cut-Off Rate
10. Earnings Valuation and the Cut-Off Rate
11. Summary and Conclusions
12. Selected References

1. Capital Gearing (Leverage): An Introduction
2. The Value of Debt Capital and Capital Cost
3. The Tax-Deductibility of Debt
4. The Impact of Issue Costs
5. Summary and Conclusions

1. The Weighted Average Cost of Capital (WACC)
2. WACC Assumptions
3. The Real-World Problems of WACC Estimation
4. Summary and Conclusions
5. Selected Reference

1. The Concept of Economic Value Added (EVA)
2. The Concept of Market Value Added (MVA)
3. Profit and Cash Flow
4. EVA and Periodic MVA
5. NPV Maximisation, Value Added and Wealth
6. Summary and Conclusions
7. Selected References