Corporate Finance Theory and Practice

Corporate Finance: Theory and Practice, 3rd Edition, the website www.vernimmen.com and the Vernimmen.com newsletter are all written and created by an author team who are both investment bankers/corporate financiers and academics.
This book covers the theory and practice of Corporate Finance from a truly European perspective. It shows how to use financial theory to solve practical problems and is written for students of corporate finance and financial analysis and practising corporate financiers. Corporate Finance: Theory and Practice, 3rd Edition is split into four sections covering the basics of financial analysis; the basic theories behind valuing a firm; the major types of financial securities (equity, debt & options) and, finally, financial management; how to organise a company's equity capital, buying and selling companies, M&A, bankruptcy and cash flow management.


Key features include:
* A section on financial analysis - a Corporate Financier must understand a company based on a detailed analysis of its accounts. Large numbers neglected this approach during the last stock market bubble and were caught in the crash that inevitably followed. How many investors took the trouble to read Enron's annual report? Those who did found that it spoke volumes!
* End of Chapter Summary, Questions and Answers, Glossary, European Case Studies
* A supporting Website http://www.vernimmen.com with free access to statistics, a glossary & lexicon; articles, notes on financial transactions, basic financial figures for more than 10,000 European and US listed companies, thesis topics, a bibliography; case studies, Q&A; A letter box for your questions to the authors - a reply guaranteed within 72 hours
* A free monthly newsletter on Corporate Finance sent out to subscribers to the site.

Corporate Finance: Theory and Practice continues to hold sway as one of the most popular financial textbooks, thanks to its four unique features: A balanced blend of theory and practice: authors hold academic positions at top ranking universities and business schools and are also investment bankers, private investors or sit on the boards of listed and unlisted companies A presentation of concepts that explain situations, followed by a discussion of techniques in a direct and succinct style Content enriched by the www.vernimmen.com website, which with 1,500 daily visitors is one of the leading finance teaching sites worldwide Free monthly updates on finance through The Vernimmen.com Newsletter , with over 60,000 subscribers The authors draw on their dual experience to enhance and expand the content of the book through the inclusion of new chapters on IPOs and management of working capital that is so key to the survival of firms during times of crisis or of strong growth. “Corporate Finance is a very useful reference book for students an d practitioners both of who m will get great help in the present complex environment in understanding the principles of the financial markets and their practical application. The book’s approach is both logical and sequential a nd presents some interesting cases that make study easier and more stimulating.” —GABRIELE GALATERI, CHAIRMAN OF TELECOM ITALIA “ I opened my first Vernimmen in 1982. After having spent a just a few weekends reading it, I felt better equipped for my role in financial management at Paribas. Now at Apax,   the Vernimmen remains my companion in my search for value creation (key in the private equity industry). ” —Monique Cohen, associated director, apax partners “ Written in a fluent and readable style and supplemented by numerous real–world examples, Corporate Finance: Theory and Practice has served as an excellent aid to my studies of finance. The book’s broad content has been indispensable in acquiring a better understanding of all the core areas of finance, ranging from the basics of financial analysis through to the workings of complex M&A transactions and cutting edge financial products. ” —GEOFFREY COOMBS, STUDENT AT ESCP EUROPE " What sets the Vernimmen apart from other text books is its integration of practice and current affairs in a rigorous theoretical framework. Recipes and pontification are replaced by a scientific ap p roach.  And, thanks to the Newsletter, this is done practically in real time!" —Christophe Evers, Professor of Finance at the Solvay Brussels School , Executive Director of Texaf "Corporate finance is a lively subject that changes from day to day and evolves regularly, depending on new market developments. The Vernimmen is a true bible of corporate finance. With regular updates through their monthly newsletter and upgrades, the authors have made it applicable to any place, any time. This is pretty unique in the field. " —Mehdi Sethom, managing director, Swicorp, Head of Advisory

Introduction: Contrasts, Shocks, Threats and Opportunities viii Preface xiv Frequently used symbols xviii 1 WHAT IS CORPORATE FINANCE? 1 SECTION I FINANCIAL ANALYSIS 15 PART ONE FUNDAMENTAL CONCEPTS IN FINANCIAL ANALYSIS 17 2 CASH FLOW 19 3 EARNINGS 29 4 CAPITAL EMPLOYED AND INVESTED CAPITAL 45 5 WALKING THROUGH FROM EARNINGS TO CASH FLOW 58 6 GETTING TO GRIPS WITH CONSOLIDATED ACCOUNTS 73 7 HOW TO COPE WITH THE MOST COMPLEX POINTS IN FINANCIAL ACCOUNTS 92 PART TWO FINANCIAL ANALYSIS AND FORECASTING 119 8 HOW TO PERFORM A FINANCIAL ANALYSIS 121 9 MARGIN ANALYSIS: STRUCTURE 154 10 MARGIN ANALYSIS: RISKS 176 11 WORKING CAPITAL AND CAPITAL EXPENDITURES 191 12 FINANCING 213 13 RETURN ON CAPITAL EMPLOYED AND RETURN ON EQUITY 227 14 CONCLUSION OF FINANCIAL ANALYSIS 246 SECTION II INVESTORS AND MARKETS 253 PART ONE INVESTMENT DECISION RULES 255 15 THE FINANCIAL MARKETS 257 16 THE TIME VALUE OF MONEY AND NET PRESENT VALUE 278 17 THE INTERNAL RATE OF RETURN 295 PART TWO THE RISK OF SECURITIES AND THE REQUIRED RATE OF RETURN 313 18 RISK AND RETURN 315 19 THE REQUIRED RATE OF RETURN 347 20 THE TERM STRUCTURE OF INTEREST RATES 366 PART THREE FINANCIAL SECURITIES 377 21 BONDS 379 22 OTHER DEBT PRODUCTS 407 23 SHARES 418 24 OPTIONS 439 25 HYBRID SECURITIES 460 26 SELLING SECURITIES 481 SECTION III VALUE 511 27 VALUE AND CORPORATE FINANCE 513 28 MEASURING VALUE CREATION 532 29 INVESTMENT CRITERIA 551 30 THE COST OF CAPITAL 569 31 RISK AND INVESTMENT ANALYSIS 587 32 VALUATION TECHNIQUES 602 SECTION IV CORPORATE FINANCIAL POLICIES 633 PART ONE CAPITAL STRUCTURE POLICIES 635 33 CAPITAL STRUCTURE AND THE THEORY OF PERFECT CAPITAL MARKETS 637 34 CAPITAL STRUCTURE, TAXES AND ORGANISATION THEORIES 649 35 DEBT, EQUITY AND OPTIONS THEORY 670 36 WORKING OUT DETAILS: THE DESIGN OF THE CAPITAL STRUCTURE 689 PART TWO EQUITY CAPITAL 721 37 RETURNING CASH TO SHAREHOLDERS 723 38 DISTRIBUTION IN PRACTICE: DIVIDENDS AND SHARE BUY–BACKS 740 39 SHARE ISSUES 758 SECTION V FINANCIAL MANAGEMENT 773 PART ONE CORPORATE GOVERNANCE AND FINANCIAL ENGINEERING 775 40 CHOICE OF CORPORATE STRUCTURE 777 41 INITIAL PUBLIC OFFERINGS (IPOS) 798 42 CORPORATE GOVERNANCE 809 43 TAKING CONTROL OF A COMPANY 822 44 MERGERS AND DEMERGERS 844 45 LEVERAGED BUYOUTS (LBOS) 861 46 BANKRUPTCY AND RESTRUCTURING 876 PART TWO MANAGING CASH FLOWS, WORKING CAPITAL AND FINANCIAL RISKS 889 47 MANAGING CASH FLOWS 891 48 MANAGING WORKING CAPITAL 910 49 MANAGING FINANCIAL RISKS 922 Epilogue–Finance and Strategy 949 Top 20 Largest Listed Companies 957 Contents 965 Index 973