About the Instructors ix About the Exam xi Introduction xv Section A: Financial Statement Analysis 1 Topic 1. Basic Financial Statement Analysis 2 Common-Size Financial Statement Analysis (Vertical Analysis) 2 Horizontal Financial Statement Analysis 9 Topic 2. Financial Ratios 13 Liquidity Ratios 13 Solvency Ratios 17 Operating Leverage and Financial Leverage 21 Efficiency Ratios 25 Efficiency Ratios--Use of Assets 29 Topic 3. Profitability Analysis 31 Profitability--Vertical Analysis Revisited and Return Ratios 31 Profitability--Market Value Ratios 33 Profitability--EPS, Yields, and Shareholder Return 35 Limitations of Ratio Analysis 41 Sources of Financial Information and Their Use in Evaluating a Company''s Financial Strength 43 ROA and ROE--A Closer Look 47 Revenues and Its Relationship to Current Assets 51 Cost of Sales and the Different Profit Margins 53 Considerations when Measuring Income 55 Topic 4. Special Issues 57 Sales and Revenues--Important Considerations 57 Foreign Exchange Fluctuations 59 Inflation and the Financial Ratios 63 Changes in Accounting Treatment 65 Book vs. Market Value and Accounting vs. Economic Profit 69 Quality of Earnings 71 Section A Review Questions 73 Section B: Corporate Finance 77 Topic 1. Risk and Return 78 Calculating Return 78 Types of Risk 81 Capital Asset Pricing Model 83 Topic 2.

Long-Term Financial Management 85 Term Structure of Interest Rates 85 Types of Financial Instruments: Bonds 87 Types of Financial Instruments: Stock 91 Other Financial Instruments 93 Taxes and Capital Structure 99 Cost of Capital 101 Valuation of Financial Instruments: Valuing Debt and Equity 105 Valuation of Financial Instruments: Valuing Options 109 Topic 3. Raising Capital 111 Financial Markets and Regulation 111 Market Efficiency 113 Financial Institutions 115 Initial and Secondary Public Offerings 117 Dividend Policy and Share Repurchases 119 Topic 4. Working Capital Management 121 Working Capital Terminology 121 Cash Management 123 Marketable Securities Management 127 Accounts Receivable Management 131 Inventory Management 133 Types of Short-Term Credit 137 Short-Term Credit Management 139 Topic 5. Corporate Restructuring 143 Mergers and Acquisitions 143 Restructuring and Combining 145 Evaluating Business Combinations 147 Topic 6. International Finance 149 Fixed, Flexible, and Floating Exchange Rates 149 Managing Transaction Exposure 151 Financing International Trade 153 Section B Review Questions 155 Section C: Decision Analysis 159 Topic 1. CVP Analysis 160 Cost Behavior 160 Contribution Margin 163 Targeted Profit and Taxes 169 Multiple Products C-V-P 173 Risk and Uncertainty 177 Topic 2. Marginal Analysis 181 Defining Relevant Costs 181 Sunk Costs, Opportunity Costs, and Capacity 183 Marginal Analysis and Product Line Decisions 187 Practice Problems 193 Comprehensive Problems with Opportunity Costs 195 Topic 3. Pricing 197 Pricing Methods 197 Cost-Based Pricing 199 Competition-Based Pricing 203 Customer-Based Pricing 211 Pricing Strategy and the Product Life Cycle 215 Section C Review Questions 219 Section D: Risk Management 223 Enterprise Risk 224 Types of Enterprise Risk 224 Risk Identification and Assessment: Enterprise Risk Management 227 Risk Identification and Assessment: Risk Assessment Tools 231 Use of Probabilities 233 Risk Mitigation Strategies 235 Managing Risk 237 Section D Review Questions 239 Section E: Investment Decisions 243 Topic 1.

Capital Budgeting Process 244 Introducing the Capital Budgeting Process 244 Cash Flows and Profits in the Capital Budgeting Process 249 Topic 2. Capital Investment Analysis Methods 253 NPV and IRR Computations 253 Comparing NPV and IRR Methods with Uneven Cash Flows 259 The Payback Method 265 Risk Analysis and Qualitative Issues in Capital Budgeting 271 Section E Review Questions 277 Section F: Professional Ethics 281 Topic 1. Business Ethics 282 Moral Philosophies and Ethical Decision Making 282 Topic 2. Ethical Considerations for Management Accounting, Financial Management Professionals 287 Principles and Standards of Professional Ethics 287 Controlling Fraud and Resolving Ethical Issues 293 Topic 3. Ethical Considerations for the Organization 297 Ethics in an International Environment 297 Ethics and the Organization 303 Ethics and HR Management 307 Section F Review Questions 313 Review Questions and Answers 317 Appendixes 353 ICMA Content Specification Outlines 353 ICMA Learning Outcome Statements 361 Time-Value of Money Tables 375 Essay Tips 381 CMA Exam Ratio Definitions 383 Index 387.