Mastering Financial Management A step-by-step guide to strategies, applications and skills
by Marsh, CliveEdition: 1st
Format: Paperback
Pub. Date: 2009-12-07
Publisher(s): FT Press
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Summary
Mastering Financial Management is a comprehensive guide for all those who need to know about financial management. Written both for professionals as well as those seeking qualifications in finance and banking, this step-by-step guide will teach you strategies, applications and skills and show you how to plan, make decisions, control financial resources and deliver real shareholder value. Mastering Financial Management: - Covers the essential basic concepts through to advanced management practice- Complements major accounting and banking examinations and illustrates how the book fits with each professional syllabus- Uses worked financial examples, mathematical formulas and case studies to explain the role of financial management- Accommodates the post-recession financial climate- Gives you free access to a comprehensive online dictionary of banking and finance at www.tbc.comFinancial management is concerned with the strategic management of an organisation's finances to ensure that financial objectives are achieved. Because money is the common denominator for the measurement and control of most aspects of a business, financial management is at the heart of all decision making, and skills in financial management will be necessary for all those in an executive position. One basic assumption of profit making organisations is the maximisation of shareholders' wealth, and sound financial management plays a major role in this. It is a very wide subject requiring knowledge of aspects of accounting, taxation, management, finance, capital management, investment appraisal, risk management, pricing, dividend policy, financial mathematics and strategic financial management. This book is targeted at those professionals who have taken over a strategic planning position but who have no knowledge of all aspects of financial management. It is also designed to help those studying for professional qualifications in finance and banking subjects. It provides a step-by-step guide from the basics elements of financial management through to advanced strategic financial management.
Author Biography
Clive Marsh runs HeathMarsh, a research and development, and training organisation. He’s a chartered banker and a Fellow of the Charted Institute of Management. He has a MA in Strategic Financial Management and has worked for a range of organisations including Shell, IBM, Gap Gemini and Nat West.
Table of Contents
Foreword
Publisher’s acknowledgements
1 Overview of financial management and its relationship with corporate strategy and the markets
A definition of financial management
Financial management and corporate strategy
The role of the financial markets
Summary
2 Financial accounting and ratio analysis
Introduction
The origins of accounting and the double-entry system
The basic principles of double entry
Trial balance
Profit and loss account
Balance sheet
Classification of assets
Classification of liabilities
Fundamental accounting concepts and principles
Ratio analysis
Summary
3 Company taxation interface with financial management
Overview
Outline of corporation tax
Value added tax – VAT
PAYE and NI
Global tax planning
Overseas activities
Double–taxation relief
Foreign companies trading in the UK
Transfer pricing
Tax and decision making
Tax strategy interface with business strategy and finance
Committing to a tax strategy
4 Inflation and the changing value of money over time
Overview
Inflation, deflation, disinflation, stagflation, hyperinflation
Official sources of inflation statistics
Time value of money and discounted cash flow
Summary
5 Budgeting
Budgetary control and the budget process
Budgets and variance analysis
Budget methods and types of budgeting and relationship with planning;
Types of budgets
Choices, priorities and capital rationing
Summary
6 Marginal costing and pricing
Overview
Fixed costs
Variable costs
Semi–variable costs or semi–fixed costs
Total cost
Contribution
Break–even point
The use of marginal costing in pricing decisions
The advantages and disadvantages of marginal costing
7 Absorption costing, standard costing and activity–based costing
Absorption costing
The fully integrated standard costing system
The principal advantages of standard costing systems
Setting standards
Activity–based costing (ABC)
The use of marginal costing in conjunction with standard costing
8 Pricing and costs
Setting selling prices
Social and legal issues in pricing
Sales mix
Using linear programming techniques to solve problems of sales mix when there are resource constraints
Using cost information in pricing
Marketing strategies
Summary
9 Encouraging performance through goal alignment and congruence
Goal alignment
Reward schemes
Broader incentives
Summary
10 Working capital management
The need for working capital, the working capital ratio and cycle
Overtrading
Stock turnover and optimal stock levels
Debtors
Cash control and management
What to do with short–term surplus cash
Working capital funding strategies
Summary
11 Business finance, long–term versus short–term finance, gearing and capital structure
The uses of long–term and short–term finance
Short–term finance
Term and long–term finance and funds
Gearing and capital structure
Export finance
Bank relationship strategy
12 The cost of capital
Definition of the cost of capital and discussion
Cost of debt
Weighted average cost of capital (WACC)
Dividend growth model
Capital asset pricing model (CAPM)
Summary
13 Capital structure
Background
The MM view
Traditional view of the cost of capital
Pecking Order theory
Capital structure, cost of capital and investments
Pragmatic summary
A theoretical view – the perfect market versus the real world
14 Business valuations
Background
Business valuers and the information they require
Asset–based valuations
Income/earnings–based valuations
Cash flow valuations
Debt valuation
Summary
15 Foreign currency and exchange risk management
The nature of foreign currency risk
Reasons for exchange rate movements
Currency risk management
Currency derivatives
16 Interest rate risk
Introduction
The causes of interest rate fluctuations
Types of interest rate
Interest rate risk management
FRAs (forward rate agreements)
Interest rate derivatives
17 Investment decisions
Investment and the capital budgeting process
Relevant cash flow
Payback period method of evaluation
Return on capital employed (ROCE)
Accounting rate of return (ARR)
Discounted cash flow, net present value and internal rate of return
Capital rationing
The effect of taxation on investment appraisal and DCF
18 Mergers and acquisitions (M&A)
Background and definitions
Considerations on acquisition
Defensive tactics
Competition Commission
Acquisition consideration
The market value of shares during a takeover
The effect of takeovers on PE ratios, EPS and creating paper value
Effect of mergers and takeovers on dividend cover
Reverse takeovers
Demergers
The City Code on Takeovers and Mergers
Documents in a takeover bid
Summary of order of events in a takeover
Cross–border M&A
How will the 2009 recession effect the M&A market?
19 Outsourcing and shared services
Background
What is outsourcing?
The outsourcing decision
Outsourcing groups, associations and information sources
Shared services
Further reading
20 Financial markets
Types of financial intermediaries
Bank prudential supervision
The money market
The capital market
21 International money and capital markets
Background
The Eurocurrency market
International capital markets
Eurobonds
Euronotes
Eurocommercial paper (ECP)
Using the Eurocurrency market to hedge against foreign exchange risk
International Capital Markets Association (ICMA)
22 Strategic financial management
Definition
Creating value through finance whilst still supporting overall business strategy
The strategic financial management process
The strategic financial management interface with corporate strategy
Financial management in a recession
Conclusion
23 Professionalism and ethics – what happens if it all goes wrong?
Background
What is good ethical behaviour?
Ethical issues
Handling ethical issues
Summary
Chapter 24 Sustainability and financial management
Background
Sustainability reporting and accounting
Financial management and sustainability
An example of excellence in sustainable reporting and sustainable business strategies
Appendix 1
Compound interest tables
Discounted cash flow tables
Appendix 2
Useful financial formulae
Appendix 3
Mastering Financial Management chapters relevant to professional examination syllabi
Further reading
Index
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