PRINCIPLES OF MANAGERIAL FINANCE
PRINCIPLES OF
MANAGERIAL
FINANCE
TWELFTH
EDITION
LAWRENCE J. GITMAN
SAN DIEGO STATE UNIVERSITY
PEARSON
Prentice
Hall
Boston San Francisco New York
London Toronto Sydney Tokyo Singapore Madrid
Mexico City Munich Paris Cape Town Hong Kong Montreal
Contents
Preface
xxxi
Revised Content
xxxiii
Supplements to the Twelfth Edition
Acknowledgments
To the Student
xxxvii
xl
xliii
Part One
Introduction to Managerial Finance 1
Chapter 1
The Role and Environment of Managerial
Finance
page 2
1.1 Finance and Business
What Is Finance? 4
1.4
Major Areas and Opportunities in Finance 4
Legal Forms of Business
Organization 5
Why Study Managerial Finance?
Review Questions 9
Financial Institutions 22
Financial Markets 23
The Relationship between
Institutions and Markets
The Money Market 23
The Capital Market 24
1.2
Starbucks—A Taste for Growth page 3
The Managerial
Finance Function
9
Organization of the Finance
Function 10
Relationship to Economics 10
Relationship to Accounting 11
Primary Activities of the
Financial Manager 13
Review Questions 13
1.3
Goal of t h e F i r m 13
Maximize Profit? 14
Maximize Shareholder Wealth 15
Corporate Governance 16
The Role of Business Ethics 17
Financial Institutions and Markets 22
IN PRACTICE Focus on Practice:
Berkshire Hathaway-Can Büffet Be
Replaced? 28
Review Questions
1.5
Business Taxes
Ordinary Income
Capital Gains
29
31
Review Questions
Summary
32
32
Self-Test Problem
34
Warm-Up Exercises
Problems
34
35
I N PRACTICE Focus on Ethics:
Ethics at HP
Spreadsheet Exercise
19
Group Exercise
Web Exercise
xiv
29
Chapter 1 Case: Assessing the Goal of Sports
Products, Inc. 38
The Agency Issue 19
Review Questions 21
23
40
41
39
29
CONTENTS
Chapter 2
Financial
Statements and Analysis page 42
2.1
The Stockholders'
Report 44
2.6
The Letter to Stockholders
The Four Key Financial
Statements 44
44
IN PRACTICE Focus on Ethics: Back to
School on Ethics 45
Notes to the Financial
Statements 51
MANAGERIAL
FINANCE
TWELFTH
EDITION
LAWRENCE J. GITMAN
SAN DIEGO STATE UNIVERSITY
PEARSON
Prentice
Hall
Boston San Francisco New York
London Toronto Sydney Tokyo Singapore Madrid
Mexico City Munich Paris Cape Town Hong Kong Montreal
Contents
Preface
xxxi
Revised Content
xxxiii
Supplements to the Twelfth Edition
Acknowledgments
To the Student
xxxvii
xl
xliii
Part One
Introduction to Managerial Finance 1
Chapter 1
The Role and Environment of Managerial
Finance
page 2
1.1 Finance and Business
What Is Finance? 4
1.4
Major Areas and Opportunities in Finance 4
Legal Forms of Business
Organization 5
Why Study Managerial Finance?
Review Questions 9
Financial Institutions 22
Financial Markets 23
The Relationship between
Institutions and Markets
The Money Market 23
The Capital Market 24
1.2
Starbucks—A Taste for Growth page 3
The Managerial
Finance Function
9
Organization of the Finance
Function 10
Relationship to Economics 10
Relationship to Accounting 11
Primary Activities of the
Financial Manager 13
Review Questions 13
1.3
Goal of t h e F i r m 13
Maximize Profit? 14
Maximize Shareholder Wealth 15
Corporate Governance 16
The Role of Business Ethics 17
Financial Institutions and Markets 22
IN PRACTICE Focus on Practice:
Berkshire Hathaway-Can Büffet Be
Replaced? 28
Review Questions
1.5
Business Taxes
Ordinary Income
Capital Gains
29
31
Review Questions
Summary
32
32
Self-Test Problem
34
Warm-Up Exercises
Problems
34
35
I N PRACTICE Focus on Ethics:
Ethics at HP
Spreadsheet Exercise
19
Group Exercise
Web Exercise
xiv
29
Chapter 1 Case: Assessing the Goal of Sports
Products, Inc. 38
The Agency Issue 19
Review Questions 21
23
40
41
39
29
CONTENTS
Chapter 2
Financial
Statements and Analysis page 42
2.1
The Stockholders'
Report 44
2.6
The Letter to Stockholders
The Four Key Financial
Statements 44
44
IN PRACTICE Focus on Ethics: Back to
School on Ethics 45
Notes to the Financial
Statements 51