Financial analysis, planning & forecasting: theory and application
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| Language: | English |
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World Scientific
2009
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| Edition: | 2. ed. |
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| Online Access: | Inhaltsverzeichnis |
| Physical Description: | XXXI, 1101 S. graph. Darst. |
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| 245 | 1 | 0 | |a Financial analysis, planning & forecasting |b theory and application |c Alice C Lee; John C Lee; Cheng F Lee |
| 250 | |a 2. ed. | ||
| 264 | 1 | |a Singapore [u.a.] |b World Scientific |c 2009 | |
| 300 | |a XXXI, 1101 S. |b graph. Darst. | ||
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Contents
1.
Introduction
1
1.1. Financial Management:
Analysis and Planning
. 1
1.1.1.
Basic Definitions
. 1
1.1.2.
Objectives of Financial Management
. 2
1.1.3.
Planning Horizon Classification
. 2
1.2.
Objectives and Philosophy of the Book
. 3
1.3.
Structure of the Book
. 4
Problem Set
. 8
References for Chapter
1. 8
Part
1
Information and Methodology for Financial
Analysis
11
2.
Accounting Information, Regression Analysis, and
Financial Management
13
2.1.
Introduction
. 13
2.2.
Financial Statements: A Brief Review
. 14
2.2.1.
Balance Sheet
. 14
2.2.2.
Statement of Earnings (Income Statement)
. . 17
2.2.3.
Statement of Equity
. 18
2.2.4.
Statement of Cash Flows
. 18
2.2.5.
Annual vs Quarterly Financial Data
. 27
2.3.
Critique of Accounting Information
. 28
2.3.1.
Criticism
. 28
2.3.2.
Method for Improvement.
. 29
2.3.2.1.
Use of Alternative Information
. 30
2.3.2.2.
Statistical Adjustments
. 30
і
Financial
Analysis, Planning, and Forecasting
2.3.2.3.
Application of Finance and Economic
Theories
. 30
2.4.
Static-Ratio Analysis and Its Extension
. 31
2.4.1.
Static Determination of Financial Ratios
. 32
2.4.2.
Liquidity Ratios
. 32
2.4.3.
Leverage Ratios
. 32
2.4.4.
Activity Ratios
. 34
2.4.5.
Profitability Ratios
. 34
2.4.6.
Estimation of the Target of a Ratio
. 35
2.4.7.
Dynamic Analysis of Financial Ratios
. 36
2.4.7.1.
Single-Equation Dynamic
Adjustment Process
. 36
2.4.7.2.
Simultaneous Determination of
Financial Ratios
. 40
2.4.8.
Statistical Distribution of Financial Ratios
. . 41
2.5.
Cost-Volume-Profit Analysis and Its Applications
. 43
2.5.1.
Deterministic Analysis
. 44
2.5.2.
Stochastic Analysis
. 46
2.6.
Accounting Income vs Economic Income
. 48
2.7.
Summary
. 49
Problem Set
. 50
Appendix
2.
A. Simple Regression and Multiple Regression
. . 56
2.А.1.
Introduction
. 56
2.A.2. Simple Regression
. 57
2.A.3. Variance of
è
. 60
2.A.4. Multiple Regression
. 61
Appendix 2.B. Instrumental Variables and Two-Stage
Least Squares
. 66
2.В.1.
Errors-in-Variable Problem
. 66
2.B.2. Instrumental Variables
. 68
2.B.3. Two-Stage, Least-Square
. 70
References for Appendix
2. 71
References for Chapter
2. 71
3.
Discriminant Analysis and Factor Analysis: Theory
and Method
73
3.1.
Introduction
. 73
3.2.
Important Concepts of Linear Algebra
. 74
Contents xiii
3.3.
Two-Group Discriminant Analysis
. 82
3.4. Ä-Group
Discriminant Analysis
. 88
3.5.
Factor Analysis and Principal-Component Analysis
. . 90
3.6.
Summary
. 92
Notes
. 92
Problem Set
. 92
Appendix 3.A. Relationship between Discriminant Analysis
and Dummy Regression Analysis
. 93
З.А.1.
Derivation of the Discriminant
Function
. 93
Appendix 3.B. Principal-Component Analysis
. 98
З.В.І.
Introduction
. 98
References for Chapter
3. 101
4.
Application of Discriminant Analysis and Factor
Analysis in Financial Management
103
4.1.
Introduction
. 103
4.2.
Credit Analysis
. 103
4.3.
Bankruptcy and Financial Distress Analysis
. 107
4.4.
Applications of Factor Analysis to Select Useful
Financial Ratios
. 113
4.5.
Bond Rating Forecasting
. 116
4.6.
Bond Quality Ratings and the Change of Quality
Ratings for the Electric Utility Industry
. 123
4.7.
Ohlson's and Shumway's Methods for Estimating Default
Probability
. 123
4.8.
Summary
. 127
Problem Set
. 127
Appendix 4.A. Jackknife Method and its Application
in
MDA
Analysis
. 128
References for Appendix
4. 131
References for Chapter
4. 131
5.
Determination and Applications of Nominal and Real
Rates-of-Return in Financial Analysis
135
5.1.
Introduction
. 135
5.2.
Theoretical Justification of Paying Interest
. 136
5.3.
Rate-of-Return Measurements and Types of Averages
. 137
xiv
Financial
Analysis,
Planning,
and Forecasting
5.3.1.
Discrete Rates-of-Return and Continuous
Rates-of-Return
. 137
5.3.2.
Types of Averages
. 138
5.3.3.
Power Means
. 142
5.4.
Theories of the Term Structure and Their Application
142
5.5.
Interest Rate, Price-Level Changes, and Components
of Risk Premium
. 148
5.5.1.
Imperfect-Foresight Case
. 149
5.5.2.
Perfect-Foresight Case
. 151
5.6.
Three Hypotheses about Inflation and the Value
of the Firm: A Review
. 155
5.6.1.
The Debtor-Creditor Hypothesis
. 155
5.6.2.
The Tax-Effects Hypothesis
. 157
5.6.3.
Operating-Income Hypothesis
. 158
5.6.4.
The Relationship among the Three
Hypotheses
. 159
5.7.
Summary and Concluding Remarks
. 160
Problem Set
. 161
Appendix
5.
A. Compounding and Discounting Processes
and Their Applications
. 166
б.А.І.
Single-Value Case
. 166
5.
A.
1.1.
Compound Future Sum
(Terminal Value)
. 166
б.А.і.г.
Present Value
. 168
5.A.2. Annuity Case
. 169
б.А^.І.
Compound Future Sum of
An Annuity
. 169
5.A.2.2. Present Value of An Annuity
170
Appendix 5.B. Taylor Series Expansion and Its Applications
to Rates-of-Return Determination
. 171
References for Chapter
5. 175
Project I Analyses of Accounting, Market
and Economic Data
179
Part
2
Alternative Financial Theories and Cost of Capital
179
6.
Valuation and Capital Structure: A Review and Integration
181
Contents xv
6.1.
Introduction
. 181
6.1.1.
Components of
Capital
Structure
. 182
6.1.2.
Opportunity Cost, Required Rate-of-Return,
and the Cost of Capital
. 183
6.2.
Bond Valuation
. 184
6.2.1.
Perpetuity
. 185
6.2.2.
Term Bonds
. 185
6.2.3.
Preferred Stock
. 188
6.3.
Common-Stock Valuation
. 188
6.3.1.
Valuation
. 188
6.3.2.
Inflation and Common Stock Valuation
. 191
6.3.3.
Growth Opportunity and Common-Stock
Valuation
. 193
6.4.
Financial Leverage and Its Effect on EPS
. 195
6.4.1.
Measurement
. 195
6.4.2.
Effect
. 196
6.5.
Degree of Financial Leverage and Combined Effect
. . 200
6.6.
Optimal Capital Structure
. 201
6.6.1.
Overall Discussion
. 201
6.6.2.
Arbitrage Process and the Proof of M&M
Proposition I
. 204
6.7.
Possible Reasons for Optimal Capital Structure
. 212
6.7.1.
The Traditional Approach of Optimal Capital
Structure
. 213
6.7.2.
Bankruptcy Costs
. 213
6.7.3.
Agency Costs
. 216
6.7.4.
Imperfect Markets
. 217
6.8.
Summary and Remarks
. 218
Questions and Problems
. 219
Appendix 6.A. Convertible-Security Valuation Theory
. 228
Appendix 6.B. Derivation of
DOL,
DFL,
and CML
. 235
6.В.1.
DOL
. 235
6.B.2.
DFL. 236
6.B.3.
DCL
. 237
Appendix
6.
С.
Derivation of Dividend Discount Model
. 237
6.С.1.
Summation of Infinite Geometric Series
237
6.C.2. Dividend Discount Model
. 238
References for Appendix
6. 239
References for Chapter
6. 239
ivi Financial
Analysis,
Planning, and Forecasting
7.
Risk Estimation and Diversification
243
7.1.
Introduction
. 243
7.2.
Risk Classification
. 243
7.2.1.
Business Risk
. 244
7.2.2.
Financial Risk
. 246
7.2.3.
Total Risk
. 248
7.3.
Portfolio Analysis and Application
. 249
7.3.1.
Expected Rate of Return on a Portfolio
. . 249
7.3.2.
Variance and Standard Deviation of a Portfolio
250
7.3.3.
The Two-asset Case
. 251
7.3.4.
The TV-asset Case
. 252
7.3.5.
The Efficient Portfolios
. 253
7.3.6.
Corporate Application of Diversification
. . . 256
7.4.
The Market Rate of Return and Market Risk Premium
257
7.4.1.
The Risk Premium
. 258
7.5.
Determination of Commercial Lending Rates
. 259
7.6.
The Dominance Principle and Performance Evaluation
262
7.7.
Summary
. 264
Questions and Problems
. 264
Appendix 7.A. Estimation of Market Risks Premium
. 271
Appendix 7.B. The Normal Distribution
. 272
Appendix 7.C. Derivation of Minimum-Variance Portfolio
. . 276
Appendix 7.D.
Sharpe
Performance Approach to Derive
Optimal Weight
. 277
References for Appendix
7. 281
References for Chapter
7. 281
8.
Risk and Return Trade-Off Analysis
283
8.1.
Introduction
. 283
8.2.
Capital Market Line, Efficient-Market Hypothesis
and Capital Asset Pricing Model
. 283
8.2.1.
Lending, Borrowing, and the Market. Portfolio
284
8.2.2.
The Capital Market Line
. 286
8.2.3.
The Efficient-Market Hypothesis
. 287
8.2.4.
Weak-Form Efficient-Market Hypothesis
. 287
8.2.5.
Semistrong-Form Efficient-Market Hypothesis
288
8.2.6.
Strong-Form Efficient-Market Hypothesis
. . . 288
8.2.7.
The Capital Asset Pricing Model
. 288
Contents xvii
8.3. The Market Model
and Beta Estimation
. 291
8.4.
Empirical Evidence for the Risk-Return Relationship
. 294
8.5.
Why Beta is Important in Financial Management
. . . 296
8.6.
Systematic Risk Determination
. 297
8.6.1.
Business Risk and Financial Risk
. 299
8.6.2.
Other Financial Variables
. 299
8.6.3.
Capital Labor Ratio
. 300
8.6.4.
Fixed Costs and Variable Costs
. 301
8.6.5.
Market-Based versus Accounting-Based
Beta Forecasting
. 302
8.7.
Some Applications and Implications of the Capital
Asset Pricing Model
. 303
8.7.1.
Applications
. 303
8.8.
Liquidity and Capital Asset Pricing Model
. 306
8.9.
Arbitrage Pricing Theory
. 307
8.10.
Intertemporal
САРМ.
307
8.11.
Summary
. 308
Questions and Problems
. 308
Appendix 8.A. Mathematical Derivation of the Capital
Asset Pricing Model
. 314
Appendix 8.B. Arbitrage Pricing Model
. 315
References for Chapter
8. 318
Note
. 320
9.
Options and Option Strategies
321
9.1.
Introduction
. 321
9.2.
The Option Market and Related Definitions
. 322
9.2.1.
What is an Option?
. 322
9.2.2.
Types of Options and Their Characteristics
. . 322
9.2.3.
Relationships Between the Option Price
and the Underlying Asset Price
. 324
Sample Problem
9.1. 327
9.2.4.
Additional Definitions and Distinguishing
Features
. 328
9.2.5.
Types of Underlying Asset
. 329
9.2.6.
Institutional Characteristics
. 330
9.3.
Put-Call Parity
. 331
9.3.1.
European Options
. 331
cviii
Financial
Analysis,
Planning,
and Forecasting
Sample Problem
9.2. 334
9.3.2.
American Options
. 334
Sample Problem
9.3. 335
9.3.3.
Future Options
. 335
9.3.4.
Market Application
. 337
9.4.
Risk-Return Characteristics of Options
. 338
9.4.1.
Long Call
. 338
9.4.2.
Short Call
. 339
9.4.3.
Long Put
. 342
9.4.4.
Short Put
. 344
9.4.5.
Long Straddle
. 345
Sample Problem
9.4. 346
9.4.6.
Short Straddle
. 348
Sample Problem
9.5. 349
9.4.7.
Long Vertical (Bull) Spread
. 350
Sample Problem
9.6. 351
9.4.8.
Short Vertical (Bear) Spread
. 352
9.4.9.
Calendar (Time) Spreads
. 353
9.5.
Examples of Alternative Option Strategies
. 355
9.5.1.
Protective Put
. 355
9.5.2.
Covered Call
. 355
9.5.3.
Collar
. 359
9.6.
Summary
. 359
Questions and Problems
. 360
References for Chapter
9. 365
10.
Option Pricing Theory and Firm Valuation
367
10.1.
Introduction
. 367
10.2.
Basic Concepts of Options
. 367
10.2.1.
Option Price Information
. 371
10.3.
Factors Affecting Option Value
. 374
10.3.1.
Determining the Value of a Call Option
before the Expiration Date
. 374
10.4.
Determining the Value of Options
. 383
10.4.1.
Expected Value Estimation
. 383
10.4.2.
The Black-Scholes Option Pricing Model
. 384
10.4.3.
Taxation of Options
. 389
10.4.4.
American Options
. 390
Contents xix
10.5. Option
Pricing Theory and Capital Structure
. 391
10.5.1.
Proportion of Debt in Capital Structure
. . . 393
10.5.2.
Riskiness of Business Operations
. 395
10.5.3.
Option Pricing Approach to Determine the
Optimal Capital Structure
. 396
10.6.
Warrants
. 396
10.7.
Summary
. 400
Questions and Problems
. 400
Appendix
10.
A. Applications of the Binomial Distribution
to Evaluate Call Options
. 405
10.
A.I. What is an Option?
. 405
ІО.А.г.
The Simple Binomial Option Pricing
Model
. 405
10.A.3. The Generalized Binomial Option
Pricing Model
. 408
References for Chapter
10. 413
Project II Application of Useful Finance Theories
415
Part
3
Capital Budgeting and Leasing Decisions
415
11.
Alternative Cost of Capital Analysis and Estimation
417
11.1.
Introduction
. 417
11.2.
Overview of Cost of Capital
. 417
11.3.
Average Earnings Yield Versus Current Earnings
Yield Method
. 419
11.4.
Discounting Cash-Flow Method
. 420
11.5.
Weighted-Average Cost of Capital
. 422
11.5.1.
Theoretical Justification of the WACC
. 427
11.6.
The CAPM Method
. 430
11.7.
M&M's Cross-Sectional Method
. 433
11.7.1.
The Cost of Capital
. 433
11.7.2.
Regression Formulation and Empirical
Results
. 435
11.8.
Chase Cost of Capital
. 441
11.9.
Summary and Concluding Remarks
. 446
Problem Set
. 446
xx
Financial
Analysis,
Planning,
and Forecasting
Appendix
H.A.
Derivative of the Basic Equilibrium
Market Price of Stock and Its Implications
. . 452
References for Appendix
11. 453
References for Chapter
11. 453
12.
Capital Budgeting Under Certainty
457
12.1.
Introduction
. 457
12.2.
Cash-Flow Evaluation of Alternative
. 457
12.2.1.
Investment Projects
. 457
12.3.
Alternative Capital-Budgeting Methods
. 461
12.3.1.
Accounting Rate-of-Return
. 462
12.3.2.
Internal Rate-of-Return
. 462
12.3.3.
Payback Method
. 463
12.3.4.
Net Present Value Method
. 464
12.3.5.
Profitability Index
. 465
12.4.
Comparison of the NPV and
IRR
Method
. 466
12.4.1.
Theoretical Criteria
. 466
12.4.2.
Multiple Rates-of-Return
. 468
12.4.3.
Reinvestment Rate Problem
. 469
12.4.3.1.
Separability of Projects
. 470
12.4.4.
Practical Perspective
. 471
12.5.
Equivalent Annual NPV and Equivalent Annual Cost
. 472
12.5.1.
Mutually Exclusive Investment Projects
with Different Lives
. 472
12.6.
Capital-Rationing Decision
. 476
12.6.1.
Basic Concepts of Linear Programming
. 476
12.6.2.
Capital Rationing
. 477
12.7.
Summary
. 480
Problem Set
. 480
Appendix 12.A. NPV and Break-Even Analysis
. 485
Appendix 12.B. Managers' View on Alternative
Capital-Budgeting Methods
. 490
Appendix
12.
C. Derivation of Crossover Rate
. 495
References for Appendix
12. 497
References for Chapter
12. 498
13.
Capital Budgeting Under Uncertainty
501
13.1.
Introduction
. 501
Contents xxi
13.2.
Risk-Adjusted Discount-Rate Method
. 502
13.3.
Certainty Equivalent Method
. 503
13.4.
The Relationship of the Risk-Adjusted
Discount-Rate Method to the
Certainty-Equivalent Method
. 505
13.5.
Three Other Related Stochastic Approaches
to Capital Budgeting
. 508
13.5.1.
The Statistical Distribution Method
. 509
13.5.2.
The Decision-Tree Method
. 515
13.5.3.
Simulation Analysis
. 520
13.5.4.
Comparison of the Three Alternative
Stochastic Methods
. 524
13.6.
Inflationary Effects in the Capital-Budgeting Procedure
525
13.7.
Multiperiod Capital Budgeting
. 535
13.7.1.
Overall Discussion
. 535
13.7.2.
The CAPM and Multi-Period
Capital-Budgeting Decision-Making
. 537
13.8.
Summary and Concluding Remarks
. 543
Problem Set
. 544
Appendix 13.A. Time-State Preference and the Real option
Approaches for Capital Budgeting Under
Uncertainty
. 550
References for Appendix
13. 555
References for Chapter
13. 555
14.
Leasing: Practices and Theoretical Developments
559
14.1.
Introduction
. 559
14.2.
Types of Leasing Arrangements and Accounting
Treatments
. 560
14.2.1.
Three Leasing Forms
. 560
14.2.1.1.
Direct Leasing
. 561
14.2.1.2.
Sale and
Leaseback
. 561
14.2.1.3.
Leveraged Leasing
. 562
14.2.2.
Accounting for Leases
. 562
14.2.2.1.
Capital Lease Treatment
. 563
14.2.2.2.
Accounting for Operating Leases
. . 568
14.2.2.3.
Accounting for Leases from the
Lessor's Standpoint
. 571
xxii
Financial
Analysis,
Planning,
and Forecasting
14.3.
Cash-Flow Estimation and Valuation Methods
. 571
14.4.
The
Modigliani
and Miller Propositions
and the Theoretical Considerations of Leasing
. 575
14.5.
Leases-Versus-Buy Decisions Under Uncertainty:
The CAPM Approach
. 582
14.6.
Summary and Conclusions
. 586
Problem Set
. 588
Appendix 14.A.
APV
Method and Application
to Leasing Decision
. 590
14.
A.I Myers Adjusted-Present-Value Method
590
14.A.2 Myers Adjusted-Present-Value Method
to Leasing
. 591
References for Appendix
14. 593
References for Chapter
14. 593
Project III Capital Budgeting and Leasing Decisions
597
Part
4
Corporate Policies and Their Interrelationships
597
15.
Mergers: Theory and Evidence
599
15.1.
Introduction
. 599
15.2.
Overview of Mergers
. 599
15.3.
Classification of Business Combinations
. 600
15.3.1.
Classification by Corporate Structure
. 600
15.3.2.
Classification by Economic Relationship
. . . 600
15.4.
Methods of Business Combination
. 602
15.5.
Merger Accounting and Tax Effects
. 611
15.5.1.
Tax Implications
. 611
15.5.2.
Accounting Treatment of Business
Combinations
. 612
15.6.
Economic Theories and Evidence
. 615
15.6.1.
Economic Theories
. 615
15.6.2.
Market Power
. 615
15.7.
Financial Theories and Evidence
. 617
15.7.1.
Diversification and Debt Capacity
. 617
15.8.
Integration and Summary
. 628
Problem Set
. 631
Appendix
15.
A. Effects of Divestiture on Firm Valuation
. . . 634
References for Chapter
15. 636
Contents xxiii
16. Dividend
Policy and Empirical Evidence
641
16.1.
Introduction
. 641
16.2.
The Value of Dividend Policy to the Firm
. 642
16.2.1.
Methods of Determining the Relevance
of Dividends
. 642
16.2.1.1.
The Discounted Cash-Flow Approach
647
16.2.1.2.
The Investment Opportunities
Approach
. 647
16.2.1.3.
Stream-of-Dividends Approach
. . . 648
16.2.1.4.
Stream-of-Earnings Approach
. . . 649
16.3.
Issues Marring the Dividend Problem
. 650
16.3.1.
The Classical CAPM
. 651
16.3.2.
Brennan's CAPM with Taxes
. 651
16.3.3.
The Litzenberger and Ramaswamy CAPM
with Taxes
. 653
16.3.4.
Empirical Evidence
. 657
16.3.4.1.
Gordon's Empirical Work and Its
Extensions
. 657
16.3.4.2.
M&M Empirical Work
. 662
16.3.4.3.
CAPM Approach
. 663
16.4.
Behavioral Considerations of Dividend Policy
. 666
16.4.1.
Partial Adjustment and Information Content
Models
. 666
16.4.2.
An Integration Model
. 670
16.5.
Summary and Conclusions
. 672
Problem Set
. 673
References for Chapter
16. 675
17.
Interaction of Financing, Investment and Dividend Policies
679
17.1.
Introduction
. 679
17.2.
Investment and Dividend Interactions: The
Internal-Versus-External Financing Decision
. 680
17.2.1.
Internal Financing
. 680
17.2.2.
External Financing
. 681
17.3.
Interactions Between Dividend and Financing Policies
. 684
17.3.1.
Cost of Equity Capital and Dividend Policy
. 684
17.3.2.
Default Risk and Dividend Policy
. 687
Financial
Analysis,
Planning,
and Forecasting
17.4.
Interactions Between Financing and Investment
Decisions
. 689
17.4.1.
Risk-Free Debt Case
. 690
17.4.2.
Risky Debt Case
. 693
17.5.
Implications of Financing and Investment Interactions
for Capital Budgeting
. 694
17.5.1.
Equity-Residual Method
. 695
17.5.2.
> After-Tax, Weighted-Average Cost of Capital
Method
. 696
17.5.3.
Arditti and Levy Method
. 697
17.5.4.
Myers Adjusted-Present-Value Method
. 697
17.6.
Debt Capacity and Optimal Capital Structure
. 703
17.7.
Implications of Different Policies on the Beta
Coefficient Determination
. 715
17.7.1.
Impact of Financing Policy on Beta Coefficient
Determination
. 716
17.7.2.
Impact of Production Policy on Beta Coefficient
Determination
. 716
17.7.3.
Impact of Dividend Policy on Beta Coefficient
Determination
. 718
17.8.
Summary and Conclusion
. 718
Problem Set
. 720
Appendix 17.A. Stochastic Dominance and Its Applications
to Capital-Structure Analysis with
Default Risk
. 723
17.A.1. Introduction
. 723
17.
A.
2.
Concepts and Theorems of Stochastic
Dominance
. 723
17.A.3. Stochastic-Dominance Approach
to Investigating the Capital-Structure
Problem with Default Risk
. 726
17.A.4. Summary
. 728
References for Appendix
17. 728
References for Chapter
17. 728
Contents xxv
Project
IV
Analyses
of Investment, Financing
and Dividend Policies
733
Part
5
Financial Planning and Forecasting
733
18.
Short-Term Financial Analysis and Planning
735
18.1.
Introduction
. 735
18.2.
The Components of Working Capital
. 736
18.3.
The Concept of Cash Flow
. 737
18.4.
Cash Flow versus Funds Flow
. 738
18.5.
Organizing for Short-Term Financial Planning
. 740
18.5.1.
Short-Term Financial Planning Principles
. . . 740
18.6.
The Cash Flow Cycle and Its Calculation
. 742
18.7.
Cash Flow Forecasting, Budgeting, and Planning
. . . 746
18.8.
The Cash Budget
. 747
18.9.
Demand-Driven, Capital-Driven, and Cost-Driven
Cash Budgets
. 750
18.10.
Users of Cash Forecasts and Business Plans
. 751
18.11.
Planning Horizons and Time Intervals
of Cash Budgets
. 752
18.12.
From Forecasting to Budgeting to Planning
. 755
18.13.
Summary
. 759
Questions and Problems
. 761
Appendix 18.A. Time-Series Components of Sales
. 766
18.
A.I The Contribution of Each Component
770
18.A.2 Interpretation
. 771
References for Chapter
18. 771
19.
Credit Management
773
19.1.
Introduction
. 773
19.2.
Trade Credit
. 774
19.3.
The Cost of Trade Credit
. 778
19.3.1.
The Seller's Perspective
. 778
19.3.2.
The Buyer's Perspective
. 780
xxvi
Financial
Analysis, Planning, and Forecasting
19.4.
Financial Ratios and Credit Analysis
. 781
19.4.1.
Financial Ratio Analysis
. 782
19.4.2.
Numerical Credit Scoring
. 782
19.4.3.
Benefits of Credit-Scoring Models
. 786
19.4.4.
Outside Sources of Credit Information
. 787
19.5.
Credit Decision and Collection Policies
. 789
19.5.1.
Collection Policy
. 790
19.5.2.
Factoring and Credit Insurance
. 791
19.6.
Summary
. 792
Questions and Problems
. 793
References for Chapter
19. 795
20.
Cash, Marketable Securities, and Inventory Management
797
20.1.
Introduction
. 797
20.2.
The
Baumöl
and
Miller-Orr
Model
. 798
20.2.1.
Baumol's EOQ Model
. 798
20.2.2.
Miller-Orr Model
. 801
20.3.
Cash Management Systems
. 805
20.3.1.
Float
. 805
20.3.2.
Cash Collection and Transference Systems
. . 806
20.3.3.
Cash Transference Mechanism and Scheduling
808
20.4.
Credit Lines and Bank Relations
. 811
20.4.1.
Bank Relations
. 813
20.5.
Marketable Securities Management
. 814
20.5.1.
Investment Criteria for Surplus
Cash Balances
. 814
20.5.2.
Types of Marketable Securities
. 816
20.5.3.
Hedging Considerations
. 818
20.6.
Inventory Management
. 819
20.6.1.
Inventory Loans
. 820
20.6.2.
Economic Order Quantity
. 820
20.7.
Summary
. 821
Questions and Problems
. 822
Appendix 20.A. Derivation of Eq.
(20.1). 825
References for Chapter
20. 825
21.
Elementary Applications of Programming Techniques
in Working-Capital Management
827
Contents xxvii
21.1.
Introduction
. 827
21.2. Linear Programming. 828
21.3.
Working-Capital
Model and Short-Term
Financial
Planning
. 830
21.3.1.
Questions to be Answered
. 831
21.3.2.
Model Specification and Its Solution
. 832
21.3.3.
Which Constraints are Causing Bottlenecks?
. 834
21.3.4.
How Much More Profit is Being Lost Because
of Constraints?
. 834
21.3.5.
How do the Constraints Affect the Solution?
. 835
21.3.6.
Duality and Shadow Prices
. 836
21.3.7.
Short-Term Financial Planning
. 838
21.4.
Goal Programming
. 839
21.4.1.
Introduction
. 839
21.4.2.
Application of GP to Working-
С
apitai
Management
. 841
21.4.3.
Summary and Remarks on Goal Programming
846
21.5.
Programming Approach to Cash Transfer
and Concentration
. 847
21.5.1.
Transfer Mechanisms
. 847
21.5.2.
Cash-Transfer Scheduling: Contemporary
Practice
. 848
21.5.2.1.
Managing About a Target
. 848
21.5.2.2.
Anticipation
. 850
21.5.3.
Weekend Timing and Dual Balances
. 851
21.5.4.
Limitations of the Popular Techniques
. 852
21.5.5.
Mathematical-Programming Formulation
. . . 853
21.5.5.1.
The Objective Function
. 853
21.5.5.2.
Constraints on Transfers Include:
Average Balance, Flow Balance,
Minimum Balance, and Maximum
Transfer
. 854
21.5.5.3.
Formulation Summary
. 857
21.5.5.4.
Deposit Variation
. 857
21.5.6.
Relation of Model Formulation to Current
Practice
. 858
21.5.6.1.
Implementation Tests
. 860
21.5.6.2.
Field Concentration Tests
. 860
21.5.6.3.
Lockbox Concentration
. 861
xxviii
Financial
Analysis,
Planning,
and Forecasting
21.6.
Summary and Concluding Remarks
. 861
Problem Set
. 862
Appendix
21.
A. The Simplex Algorithm for Solving Eq.
(21.8) 862
Appendix 21.B. Mathematical Formulation
of Goal Programming
. 865
References for Chapter
21. 868
22.
Long-Range
Financial Planning
—
A
Linear-Programming Modeling Approach
871
22.1.
Introduction
. 871
22.2.
Carleton's Model
. 872
22.3.
Brief Discussion of Data Inputs
. 875
22.4.
Objective-Function Development
. 878
22.5.
The Constraints
. 880
22.5.1.
Definitional Constraints
. 881
22.5.2.
Sources and Uses Definition
. 888
22.5.3.
Policy Constraints
. 891
22.6.
Analysis of Overall Results
. 900
22.7.
Summary and Conclusion
. 907
Problem Set
. 907
Appendix
22.
A. Carleton's Linear-Programming Model: General
Mills as a Case Study
. 908
22.A.1 Problem Specification
. 908
22.A.2 Solution
. 909
Appendix 22.B. General Mills' Actual Key Financial Data
. . 911
References for Chapter
22. 912
23.
Simultaneous-Equation Models for Financial Planning
913
23.1.
Introduction
. 913
23.2.
Warren and Shelton Model
. 913
23.3.
Anheuser-Busch Companies, Inc. As A Case Study
. . 918
23.3.1.
Data Sources and Parameter Estimations
. . . 918
23.3.2.
Procedure for Calculating
WS
Model
. 928
23.4.
Francis and Rowell (FR) Model
. 934
23.4.1.
The FR Model Specification
. 939
23.4.1.1.
Sector One: Industry Sales
. 941
23.4.1.2.
Sector Two: Company Sales
and Production
. 942
Contents
xxix
23.4.1.3.
Sector Three: Fixed Capital-Stock
Requirements
. 943
23.4.1.4.
Sector Four: Pricing
. 944
23.4.1.5.
Sector Five: Production Costs
. 944
23.4.1.6.
Sector Six: Income
. 944
23.4.1.7.
Sector Seven: New Financing
Required
. 945
23.4.1.8.
Sector Eight: Risk
. 945
23.4.1.9.
Sector Nine: Cost of Financing
. 947
23.4.1.10.
Sector Ten: Common Stock
Valuation
. 947
23.4.2.
A Brief Discussion of FR's Empirical Results
. 948
23.5.
Summary
. 948
Problem Set
. 948
Appendix
23.
A. Procedure of Using Microsoft Excel
to Run FINPLAN Program
. 949
Appendix 23.B. Program of FINPLAN with an Example
. 949
References for Chapter
23. 959
24.
Time-Series: Analysis, Model, and Forecasting
961
24.1.
Introduction
. 961
24.2.
The Classical Time-Series Component Model
. 961
24.2.1.
The Trend Component
. 962
24.2.2.
The Seasonal Component
. 963
24.2.3.
The Cyclical Component and Business Cycles
963
24.2.4.
The Irregular Component
. 966
24.3.
Moving Average and Seasonally Adjusted Time Series
. 968
24.3.1.
Moving Average
. 968
24.3.2.
Seasonal Index and Seasonally Adjusted
Time Series
. 969
24.4.
Linear and Log-Linear Time Trend Regressions
. 976
24.5.
Exponential Smoothing and Forecasting
. 980
24.5.1.
Simple Exponential Smoothing
and Forecasting
. 980
24.5.2.
The Holt-Winters Forecasting Model
for Non-Seasonal Series
. 985
24.6.
Autoregressive
Forecasting Model
. 989
24.7.
Summary
. 993
xxx
Financial
Analysis,
Planning,
and Forecasting
ProblemSet
. 994
Appendix 24.A. The X-ll Model for Decomposing
Time-Series Components
. 1008
Appendix 24.B. The Holt-Winters Forecasting Model
for Seasonal Series
. 1014
References for Chapter
24. 1020
25.
Econometric Approach to Financial Analysis, Planning,
and Forecasting
1021
25.1.
Introduction
.1021
25.2.
Simultaneous Nature of Financial Analysis, Planning,
and Forecasting
.1022
25.2.1.
Basic Concepts of Simultaneous
Econometric Models
. 1022
25.2.2.
Interrelationship of Accounting Information
. 1022
25.2.3.
Interrelationship of Financial Policies
. 1023
25.3.
The Simultaneity and Dynamics
of Corporate-Budgeting Decisions
.1023
25.3.1.
Definitions of Endogenous and Exogenous
Variables
.1023
25.3.2.
Model Specification and Applications
.1024
25.4.
Applications of
SUR
Estimation Method
in Financial Analysis and Planning
.1038
25.4.1.
The Role of Firm-Related Variables
in Capital-Asset Pricing
.1038
25.4.2.
The Role of Capital Structure in
Corporate-Financing Decisions
.1043
25.5.
Applications of Structural Econometric Models
in Financial Analysis and Planning
. 1045
25.5.1.
A Brief Review
. 1045
25.5.2.
AT&T's Econometric Planning Model
. 1045
25.6.
Programming vs Simultaneous vs Econometric
Financial Models
. 1047
25.7.
Financial Analysis and Business Policy Decisions
. . . 1049
25.8.
Summary
. 1051
ProblemSet
. 1051
Appendix 25.A. Johnson
&
Johnson as a Case Study
. 1052
25.A.1 Introduction
.1052
Contents xxxi
25.A.2
Study of the Company's Operations
. 1052
25.A.2.1 Consumer
. 1052
25.A.2.2 Pharmaceuticals
. 1052
25.A.2.3 Medical Devices and
Diagnostics
. 1053
25.
A.
3
Analysis of the Company's Financial
Performance
. 1053
25.A.4 Variables and Time Horizon
. 1061
25.A.5 Model and Empirical Results
. 1062
References for Appendix
25. 1069
References for Chapter
25. 1069
Project V Analyses of Financial Planning
and Forecasting
1073
Author Index
1075
Subject Index
1083 |
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| indexdate | 2024-08-28T00:11:07Z |
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| spelling | Lee, Alice C. Verfasser (DE-588)132014335 aut Financial analysis, planning & forecasting theory and application Alice C Lee; John C Lee; Cheng F Lee 2. ed. Singapore [u.a.] World Scientific 2009 XXXI, 1101 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Bedrijfsfinanciering gtt Prognoses gtt Unternehmen Business enterprises Finance Textbooks Unternehmen (DE-588)4061963-1 gnd rswk-swf Finanzmanagement (DE-588)4139075-1 gnd rswk-swf Unternehmen (DE-588)4061963-1 s Finanzmanagement (DE-588)4139075-1 s b DE-604 Lee, John C. Verfasser aut Lee, Cheng F. Verfasser (DE-588)129807907 aut Digitalisierung UB Regensburg application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=017111335&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Lee, Alice C. Lee, John C. Lee, Cheng F. Financial analysis, planning & forecasting theory and application Bedrijfsfinanciering gtt Prognoses gtt Unternehmen Business enterprises Finance Textbooks Unternehmen (DE-588)4061963-1 gnd Finanzmanagement (DE-588)4139075-1 gnd |
| subject_GND | (DE-588)4061963-1 (DE-588)4139075-1 |
| title | Financial analysis, planning & forecasting theory and application |
| title_auth | Financial analysis, planning & forecasting theory and application |
| title_exact_search | Financial analysis, planning & forecasting theory and application |
| title_full | Financial analysis, planning & forecasting theory and application Alice C Lee; John C Lee; Cheng F Lee |
| title_fullStr | Financial analysis, planning & forecasting theory and application Alice C Lee; John C Lee; Cheng F Lee |
| title_full_unstemmed | Financial analysis, planning & forecasting theory and application Alice C Lee; John C Lee; Cheng F Lee |
| title_short | Financial analysis, planning & forecasting |
| title_sort | financial analysis planning forecasting theory and application |
| title_sub | theory and application |
| topic | Bedrijfsfinanciering gtt Prognoses gtt Unternehmen Business enterprises Finance Textbooks Unternehmen (DE-588)4061963-1 gnd Finanzmanagement (DE-588)4139075-1 gnd |
| topic_facet | Bedrijfsfinanciering Prognoses Unternehmen Business enterprises Finance Textbooks Finanzmanagement |
| url | http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=017111335&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |
| work_keys_str_mv | AT leealicec financialanalysisplanningforecastingtheoryandapplication AT leejohnc financialanalysisplanningforecastingtheoryandapplication AT leechengf financialanalysisplanningforecastingtheoryandapplication |