peumgy earyezion, wppaurez qeuaez Tews] qezrey uipnurez wipprusen ° Uipiqy reurez qerzpney Uelze [ezry peuryy uepror “q proyperg Playsonsany ‘\ Ydjopuey ssoy “y uoydoyg Acree eiskerey UL Suguoumpung, juawebouny) joDunUiy,About the Authors Perpustakaan Negara Malaysia Cataloguing in-Pub | Financial management fundamentals in Malaysia / Ahmad Rizal Mazlan fetal), 1. Businesseterprise-Finance, 2, Financial management. (. Abmad Rizal Mazlan, 658.15 (yr Education at Stephen A, Ross Randolph W. Westerfeld Bradford D. Jordan i Stephen A. Ross Faudziah Zainal Abidin Facuty ol Fanoe ana Corporate Finance Fundamentals EB | ISBN: 0.07-29912146 | | Faizah Ismail Ori copyright © 2006 by The MoGrew- Hill ayo Pace and Bak, Univers ara Maya Companies Ine, All igh reserved 7“? Fesy of Pace and Bankr, Liver ara May Zaemah Zainuddin Faculty ol Finance ane Basing, Urices Copyright © 2007 by MeGrav. 40, Jalan Pengacara UI/48, Temusys Selangor, Malaysia mine @megraw ill. com Norzalina Ahmad aca alFeaee ae Bering. Jets All rightsveserved, No part of tis pub ny form of by aay mesas, of store the prior winen peri 123456789 10sP SP 1009 OF oy ‘When ordering this tite, use ISBN 978.98.3850,0-6,, 7 Printed in Malaysia sea Syowsqpmeneinaitg 73 eh Bupunodang pee ene, emg |g ft Pel Avon joaneA sun. au ZORENEA or UORERPeAUT §adeUD ining Jo UORen|vA’ Badu ed sxojsypeg nue ewIng oi ‘poy Suey jeoueUly Sujetiey sieareD ewOg Sy yin pur Bueyy eR] Fy Yoeoudy s9)09 Jo Beweotay aL -Yo07 SW sep SlguueporoueL kd {Bug HEHE ara ce cpnoig pue Sunn este way RIOT pS ean eee ; ew eae : soppog animus 60 Sime i ar iz wears ! voyouny ives oseas605) Sb any ee ee ‘Aquep| Noy mgeu, ye spleuy omy CE sure prpenes Ze eo y sana ppp 1509 Saugus MA SUREOM CHrEEUD 7 notg urea pu soe, ‘Showers Rove zd a suosnauag pus Heung 9 a Unsodng pie seve EUS 'L o ‘unjedion oy ronicg ee way foueby au yt L _waweseyOUE 9129 94. age seis fo swog _afeny pug ou pre wevabavey ues uowadeuey jepueuly 0} uoRINY rade quaweSeueyy epuEULy Jo MPUOKD BuO IEE aod w suowpmy o1p anoqy syu9}U0> aoujelg53 Moron Present and Flue Veluos 54 Sunmatyand Coraliions ‘Chapter 6 Discounted Cash Flow Valuation Futue and Present Vas of Mutpe Cash Fbus 62 Vang Level Cash Flows Annus and Parti 83 empaing Rats: The Ec of Conpuunng 54 Loen Types and Loan Amarin 85 Sunayyand Condusons (Chapter 7_ Interest Rates and Bond Valuation LA Bonds and Bond Valuation 172 Nore on Bond Festus 73. Bend Ratings 1 Sorters 117 Summary and Condusons Chapter 8 Stock Valuation 81 Cotanan Stock Vauaon ‘82 Sore Feats of Connon end Pofored Sacks 83 The Stock ares 84 Suna and Coscaione Part Four. Capital Budgeting Chapter 9 Net Present Value and Other Investment Criteria 94 Net Present Valve 92. ThePayback Rule 93 The Disoouned Payback 9A The Average Acoang Retun 95 Thelm 97 The Pratoe of Cantal Bugetng 98 Summary and Gorousons (Chapter 10 Making Capital Investment Decisions LY Pj Cash Fou: A Fst Look 102 Inremental Cash Fons 103. ro Fora Francia! Saterrts and Project Cash Fane 108 Nore on Projet Cash Faw 105 Ateratve Oats of Operating Cash ow 106 Some Special Cases of Dscounie Cash Flow Anais 107 Summary ard Condions Operating Cash Fo, Sales Volume, and Beas Even Operating Leverage Capita Ranng| 11.7. Summary and Conlisons PART FIVE Risk and Return Chaptor 12 PART SIX Cost of Capital and Long-Term Financial Policy (Chapter 15 Return, Risk, and the Security Market Line 121 Basie of Rsk and Retr 422 Expcted Retr ana Varroas 123 Poricios 127 The SMLand te Coste Capiak APevioe 128. Summary and Concsions 146. Agency Coslsingosedby Crdiors 147 Opal Cail Stacie 448 ThePie gin 149. Otha Capt! Sructwe Behaviour 14.10 Surnary and Conousons Dividends and Dividend Policy Givdends and Didend Payment 152 Does Dividend Poly Mater? 15. Estbtsing a Dividend Poy 15:7 - Sock Repushase: Ar Alznav fo Cash Ohidenassoak jks wpe o Apn3s ano uaq OL slop srouprens qpmaep nino quawaseuepy jeoueuly 0} uoHjoNpo.qU] ENCE) sage eeu ro ‘y xipuaddy ele uosnevg pur hewn aig e og 28 oe oe See 185 904 65 2uaweBeury jepueus jeuoReUseDU| 6) zaxdet souewiy jeuoRRUEIM LHOIA LUV as os 885 206 ae es os iss 08s sqetny pe suowaBeveyy Aioenuy pur oS suoejung gue fren foyog resueuig way Hous Jo siadsy ef yseg ay pum 0 Bu ar ede Bunyoyy pus 4se Bu sy ‘Baur pe aouwuis wo 204s 9) N44 wowolieuey pu Sued eueUlg WHO L-HOYS NEARS LVS uy soso ove de cup saad oo pe soup2 PART ONE OvriorftanclSngenee FINANCIAL MANAGEMENT 1 ANDTHE FINANCIAL MANAGER Inshs section, we dics where the finan kefring corporate Bnaee adh ob What Is Financial Management? 9. Kaw wil you amage etre and paving sp “These ae oo the oa questions by ‘he process of planing ad a capital bag Tarpon adage Imagem ineiens CHAPTER! LeoaoneaFninssMasgonoe 5 SUA)aad pag a 06 fs wo fon oa sod diyssauzseg “mo na oan as 9 es sna sue 8 28 pUEN LYRE djysio32psdosg 205 rowatagttxan mans ANOLMYA £ mustupiymeyuepipens NBLAYHO(6 PART ONE Oneview otf Manger. CCHAPTERL lardnto Fran Hangin 7 Gscss bear ea any form a buses. cxporation Concept Questions |e Waite dese beneena gered nite partpt 124 ty the orpoee torn sper when canes orashy a THE GOAL OF FINANCIAL MANAGEMENT Asuing that we rest ve ight come op with sme ides ke he coe thse stokes. hiss cub vain ening ed tvine: at he carport evel when they stockholder to ongoing eoport edt by the cong ‘his‘ spt 90 OND puowaseueyy Jepouaul, jo sorseg oy BuLKJZapun sejdiautsg awog ‘wpa4e op pau aun an ebm ‘eds Jeon jexUaN aso ¥ sos 2g a9 oo OE PE soustesymeay nuominy ERLAVED seoysaep od pr 8 2 7 ane ud e925 fy at YO An anedemesmypioisg BNOLNYE &10. PART ONE Ovevio ct na gen THE AGENCY PROBLEM AND 1.4 CONTROL OF THE CORPORATION CHAPTERS lnvosonoFiesltoageane 1p Agency Relationships “Thera between setlists and asset is lle an ag reionhip sae emma up pone le byron osma a =r lo it a nc i aan sem mea ML A A 4 sc Foo see apne py it “enypigpan varken> 3 pe ‘gr a8 evo aouppon sag stn Sea Limninno meprs esa! pap xed one sy apm mera bas C1 rouse epeyaon advCHAPTER heedtenoFinmalMigtien 15 What About the Creditors! Interests? ‘Teak finn esd aston fr oudeapor,sobse wit Byicenalite tm ne Topeak se yal oe 5 ‘oes ad creo are tbe nly isons. This isa ste 5a. Wha icy aac |. Ware age rls and how do in |e Was coos d naan aparacrs | Concept Questions9) asin SN 8 pr 2p sa 9 pn Soma no FP RES sp “inci poe Sx 9s py ye er Seta a> ee syax sey Arepuoaag snsion Kzeuutse] 11 wutemyqsunyervopmamy HERLAVH sxe prssnip 9 ep 5 ‘yseoanpoe: few suey 0 “Shere ustusnad ox pe 4890 spew poo ep puesnas 33 vwnamtog emer aD at 18 Jap ov wopeuno Jo wo} sans ao saBeuage anys 2 Te NOLLWYOdYOD SH GNV SLAUVW TWISNVNIF ntunyrpay ease 3NOLUYE 3CHAPTER! iraionofemclMiegnen 1p experienced significant growth oer the | ting scr hat nosets pee, ‘Sonumnas por Te suey pee oveorsrponi nde ees peasy, ENT) | “seep cin ony ano ele my my eg pe edo duocing 5 HO myer lggamto sans An S/n DI. BAA MO]4 Yse> pur ‘saxey ‘syuowiazezg jeoueuly ao go ay rn 9, sep “aun ej dure we a8 worrp yo a yanog esvessop mau ose 2 a 22 yy sSNA WoSpa NOUBEUR|Y EPUENLLA,“T aig FUER EDR PURE EO HESIOD omunenieop senna 3NOLR OE122. PARTONE Orie Feats FINANCIAL STATEMENTS: ements consist ofthe Balance Sheet, Income Snemest and Sttenen of Cah Flos 21 THE BALANCE SHEET that mse pi ver tha sane iis asl positive a abel im Building the Balance Sheet ‘tira cuant ascts f R05, nt ascot of RISO, sotto ot of AT, bree sheet lok he? Vial Ie hae” = F270, so shareholders eqly i hei ree eet woud ok ie ‘le say0 REO 2p AC Nop FIFON ‘ogonps 2 enbS4NS Dg HD 9) Kqenoefipnber mas ‘op "yp 6 ouausoa a ro ese a au game po oats po ses IPRT vine ‘sao e173 TSU, an 0 ant ane 17se pu funbo ssn op x pa yoy ap ep ono atom no SNL FE HE syyegpummesueaes ena) ZuaLevHD16 PARTONE Curva Franson ‘The balance shea spotty wef eo many den pai coffin. Indee, many fhe mest vase ase tha im mgt hve — good mange- considers nese, (CHAPTER? Fant Samet nCa Row 27 Market Value versus Book Value The Mang Cporaton has aod assts wih a bok vale af R700 and an appraised markt ve of abou A000. Nat wrkg caps REO ante Docs, ut aro ‘Wecen casual to singed bare shes cnn erountg (Dock valu) ees and one in eco (ae vale ‘ems: a | eases Cn a ae a =a Tae Deron ra Ray Bue Inthis wrangle, sharehote’ equity aru wor rast cee rach a6 wha is | stoun on the books. Te dtincion be Concept Questions 2a Whats ate hes ey? 1 Whack Whar do we mea by fan erg? npr ha rc ange Wi THE INCOME STATEMENT 2.2 rement messes efouasce over sme pei ncome een! eqn is sly a quater ea ft Coren ender |ons pn pes Tpotany 2a oso esd swsay YseoUON 62 mage pevoeemtaanns ro TRLAYHD saa pn Spgs Sapo pn uy uc 249 ous BU BEL su 9d spuspupaen way Sa Se ‘eg unposegsoneP po2 au Bape sens ‘zeus s9d spuopyig pur figures Bane roe our ae, x pion 8 em pur pene asf = voreseiag om esspebie 09 ones Eons ECETENCI7§ esis oa pen BNO UME AEBp PARTONE Ondewol finn Huson CHAPTER? found SecemenintnkCohflor 31 CrnTaa aa) ‘meats online for almost amy company. ‘The Statement Of Retained Earningscs -Bystog ay ah pasa se ng saad 5p pM Ops e072 a tnd 20 850.09 uso, sus 259 po Supeds pede "ao uso Bund sprue ze vou SRE ed] ey BED SyDSSY WO Moyy YSe 4 prem megoUn 2 ¥aLAVHD MO1d HSWD ve : 9 OOOH = SSSR HOTT uusinimmmgpmiiaio NOLwd Tfcmprton a havea regatvecash low AS em nse mre nosey by Dorowing ek oles ding te yar, oid ferent users cle pls "fee cat ow from sas o someting qe sina, Cash Flow to Creditors and Stockholders Caeser esto Cash wt credits sometines called ash low 7 bylders we wl we se vers interchangeably. fe cath ow Aner eras frm stra se Ge yom 9} x SESE OPAL sovdp a pass sapgepaye Noy soURA tan YD PRPS SU, 2109 2]0q 495 SMO} YseD r9]dUIEXA UY any, 66 AHO BE 3 EH pave sion nue yarimpsununng enc 2 Yahav ace non peeping Bam ED Saou ae (gman easnpme snap EO ‘unuogaas pedis © Sem TEE Rommpen n6nn ‘am og Sn tupeg = ana) Serene + scope eu asegseasepy mu Bapg = BIE EDN em rican ~ ween SRS © anys Gey ane fossung mousse upmwno anova Hf28 PARTONE enor Fam Mange (CHAPTER? Fm SuensTon, Cabin 39 naa (ose ots ts Degen aig ter nl an nesta Foc example, sap yee What ath oo Net income fr Dale wiht RMIT We 208 ‘ick tothe ML Corporation exiape sd Tl 2 perigee ig eo uti Net dase oe by RN2SO Dole hs Spent focal of RUM, ‘Change in NWC and Cath Flow fro Cuthieo ovine ‘Concept Questions Lda Wihotsth cath ow ity! Eas wha {Li Wit we the cnpenents of peraig ch fom 2.4 Wy snes pinot cmpenex cf epi ashau sBang> i oy enya ao ran Dapp son STE AY peop 2 ance Suga sass pKy yous ag apo ane my Speeds les pF 28 GN ine seojy tomo esapaaog* ae iueopegpar casey oa ‘5 ae suru = (90 99m ex ne om = sv, or) spor romes anos o83 w emotog ve posse 09 sre co pass our UM UL, RG SFE see sopome — ET THN swe wo. a ene ea veoeaBor sag 99 Wy soup menrienes RR a NBLAYHO quae 400g nos 01260 ‘ho Bid sao of eu pur “onPSaop Se i 4 i : SNOISNTONOD GNY AUVWWNS st aoustenjionayeiaise9 BNO LWW OF42 PART ONE Oars nse (CHAPTER? Fave SatometunnandCah fon 43 ‘We now combine operating cash Sow, et capil spening and the changin ex working capo gt te lish Eowfom ast: 7 Operating Cash Fw Suppose company’s opening cash Row was negative fer several yeas raring. Ith neces good sino ba ign? nz coeraron Cou company’s change canon fons : Expl how tis mph come Gpeatngesihiew RANE an Dare oe ge ae a eee ee LL SF magupyprsom imme 4aLAVH{6 PARTONE Oerivsffnncttampse % 2, Financia Statements Dra up an income steed and ale shee for is com- lelating Cash Flow For 205, calc th eash ow fram sts, cas flow to creditors, and cash Howto stcekboler, S&P Problems __ wwwmbhacom/edumarketinsight iweb it a we ccoperies om, nin he se te the ch How toscek- bes andthe cash ow tereion.#18 we so 8'5e8 fa uso zs mien 75 201 geese I i] I m S83 ae a sa ee meee tach ae es ws ue Be ee ms sa atl MOOT YASOTD W'SLNAWALVLS “WIDNYNId ONY MOTd HSVD EDI OF sonics enema CHBLAVED may rotaywacen pa woumcs snag omiive 9CHAPTER? Wasting wis fed Sones 5 i Concept Questions | {Ata Wihac ina sorce fest Gie dre exemple, ! 2b Whos orplitan of st Ge ree caps.jo sfonde 58 au ante ene peste, oun peosen, ‘eiine 6 ETI 1S csmmesroinuntiny, cunLAND ep noe aurea herpes OMEN TS SIN3W3ILVLS TVISNVNId ve G3ZIGUVONVLS al op 'g a) septs unooze yas poner oypeaeg sou et ‘ssid yo pecaneg ak Bonen eamseehow Puck sticks up ines of cost cao eal sy ives grew“Srey oer anno pie nae puro ewe mL KR seeaop ung rae lj spn EES AIST aeaeN Ay ARE ‘245 9003p) 600 va Cutjouns aq yu es pa 20 gs fguaous cian reso ren ce Suna ED “penn se SoSSe uno n:—> squang queuing, “saupinoa one) noun wou 6p aru Sea we pe span get 9300 fos jer no 0 0 sip Sac op 15 memos etn CUBLAVAD oyu sd pee ea seunseapy Kaspinbry 40 ‘Kovenjos wa9y -13045 Saag omajug to seems unas oom 96Si PARTTWO FrslSnenne dng Toe Pog ‘Nie hares cash to buy ventory does oot fc the cue rt,bt it redues the quik, Again. the ie is ta invenoy guid compared wa For rfl sao in 2005 wos ‘iscanent rato. ‘Other Liquidity Ratios We biely meton tee ober measures of qiy. A very shorter ce meted inthe cash a: low vale might indcateelatvely Hw Teves of uy. Hee, his io y S40 53588 = 47%. ‘CHAPTERS Wor wh Fine Suonns $9 egeesition and meres, were S134. Te average for newly funded oe vay of evenvas. For such copa, te ase an analyst might say hat Pato ses 28 pe cor wtb teven makes any ifeenc ped19 mums our WAS CHRLAYHD sonst rma paw ove rund wos Se De of fs—-sogenaap po "ove sat op se 9 NN sour gILoM MA WEY oBesOAED YsED 2210 sun gy pamiCo 1eyDSH pi pan03 ‘seats se 9 Sy fered Powe owas = sar wa, SHE 25 oes ssa a ys SOG aE pd FOS Jomo un sy mo Fo ssf ou am 29 Ao PaumN.0 YO PEs pag Ee feral 2p ase 23 ‘Sysop erp wea (oPeq asap) aos! WAP seNN MmaeeD a seanseay ‘Jeaousn] 40 ‘juawaBeveyy y25sV pe wcrmpaidp ‘sxe enn sng eStnna QLI HO ONT Gee eomyipiney undo pemanes ies OMI OFwe convert it days dy x Days sks inreabies = = 15) Te cost of gods slic $1,844, and accounts gaya re $34, The tsnover is ‘hero $1.810/$344 = 8.9 mis. So payties tuned ver sbou evry 26509 = 94 ys. On average, ten, Prutoce lakes Stan Yo pay Aa pence, we righ ae ot of sae, Asset Turnover Ratios Moving avay form receivables, we can consider sever “ig pete a Sales we winver = SRE = 138simee 8 This ato eases ow on sles, abigh value is prefered (hy), Sa ta set urover = ‘ofl asst, Howftan cous hs company tan Tie total asset rover ere 49 tes pe ‘etl assats ovr cori, CHAPTER? Wokngeth rnc Sens 63 16) ch “Wonk” eget ot of our working capa, Once again, Ban1 prgeuo> Syzeszo ou voneaope uo bed wre st sakaszan yo 0 ug 10 sosnseayy anje, 39422W shojo) 8 30N pu YOU ara: UD am sue ea sag = z/lione + 626 Aeon aoe loves = gilease + cure)g= sss ny fyb sess pu ete ere sO} HELE Ah 8889 BEMAyEO MK pron WOH PORN} 4 HAH! ‘esse steve po be sfeae ws usp 25090255 pneu UO SE ‘posed oy ao sovewnyes anseouo papas yrs Fe YOK put BO oRO vou pur 30 59 minonos ane eid caaLayHO oe o una sooo Sup tami frmgo en 9 eps oy 8 ons So sve} — ue Er ‘ian ‘ow od so oy open Op Ea Ae seedC UIBIeW GO, ‘uueg ection pemenunns oty GMALLAVE(66 PARTT WO Fan Samra emo Ps onan Market-to-Bools marker bok rata: per ie A second commonly quoted market valve measur isthe Tera wast shar is ttt egy (ct jut comton sos vd by the ‘Common Financial Ratios | suerte solvent, o auld ratios Ccomna « SH ‘ores viata = Cin ao nS Net wong cat fotal assets = MERON SSE nal mise = I Aes eto enor = Day eden inetony = Aecthbles tuner = Da sles restates = sae ec over = Si Toslasee Surana espe cay op is or tas tos eae pos wey 50 rey uo Temas coma 8 evs esate oe rade anon = Tot ast cur = ian ais ‘irae 1 Langer sens. ancl overage, ies Talal wa ety Tes ootoe = lait — Debeegiyoo = Tol etvot eaty yi = Total neta _—_tonptomgas_ Tangier cet + Tey Lanptamt to = Times eet esr ao « EBT ine 8» Dopodaton stheoneape ro = vee Potty ais Pe See Reo aay 1 Marat toe aor Prceninga rao» PARES CHAPTERS Yorgi Fardeen 47 Concept Questions 3a Waar e te group fri! Ge i a hee amped | 308 noe llc freee hte se feel anne or prac of to othr aos —ROA a the ROB = ROA Egy Losing bck ot Pt pir = ROA X (+ Dobe egy ati)a ei all aaa | 5| 55 gets 49 Pqeope da yoo shen 3 tps sly 2591 ed Np uy 10 pay YAN PEO osu qs ch ens a oF 4,98 8508, jeuy quog ng papuedxa UV ee yensnoxi eyo jer sop poe sain a nce 0 sR DAES JOM FED w IHN. ne na so 69 sananos oe one CYBLIMED tied 9 ge 8 SRI ANB AOE HE rg omega oy uesammnsrpnes OLLITo PARTTWO eh Ln Tem ee Pag CHAPTERS erty tment 7 EEA) Extended De Pont Chart for Genera Mills Why Evaluate Financial Statements? ted by a ae ie [aon] | L . Tr | ell ss] suthact | Sites us | curent asets a5 jem [ es ae =r | [eae |= S546 a _ elie aie ‘1207 ‘Concept Questions 2a. Rann amas or ROA,an be grenade proc con tn Wh vo? 2b Recen neque ROE ca be egret produ of eet ation Which re? USING FINANCIAL 3.5 __ STATEMENT INFORMATION(eau nouR weAS Jue 9 squrduca op uo Ys vena 0125696 sued 6 ON 6 ‘qo to peg anja pln Yo} FYBIMEDU UDgEED a a tea SAEAAES aqua oy Sou 72 9-3 98.0] vepaus oly ‘payed AMY POE ONG a ‘enun'y = 252/96 20 pr serqaoal sop ay 0g Seu SEZaICNOD aMLA gel 20 uN ZS2YEA ep BLO A ME AN ZI BEL separ pi exgRUSRS 0, Fada! aq AD EF POEM SE raWvXa > spy OM EL munasposnytntinon cuRLATHD Aran pomuywaysio susan fous ONL TLi 14 PARTTWO. Fr Send agen Fr Paving TABLE 3.11 Selected Finacial Statement Aetat—Handuare Soey_ ice bora, 5251 NAICS 4441900 CHAPTERS Wong wih Frannie 75 Selected Ration AatakHordvr Saes_Sice 072, 0294 Gales aast20) ‘Gren Dats Soria by Sos Srmowratve sci Bay S Srp toa Oe “Wee ot siene oon on Unguites a @ 4 Pons ® 8 1 angie “a x» 8 et o os ® ‘ter ‘00. ayo. sige a 2 ‘ry coe oats ‘Gare aero soso+a soomudano amo sous oud -uoe0 ps -soxsuno 106 904 paemsep 9p aU NEED OTP eyo op app ep UPB. MEMIM PHEAY PERNEPNS MOT BOP suawares ap 1 720) yong a 2p 4p eID a BN oN a ANI {gta os 280 0 gD asp PE aE pe UMD see ‘sa i Juogton cy pssonp 9 Yo Jo swe wens sang Jo sede pss sO SL seer Es tl eee SE ve SNOISNIDNOD ANY AUWWWNS ewer 6 ara Tete 70 a sre. evo wo ea ero evo [Br ae me we |oer sez owe eae 0543S apes Ansnpuy sueduo om yee ey ecu OMLLAN FE18 PARTTWO Fas Soon aoe Tem Pne CHAPTERS. oir ra See i “7 Tealtanstaesesouner’ sqily —_RNTAST oesy pond eq 64 1 5 psoapa pa sey wont ct Sonar cera ron op of sly Bp 9 ofa oes oo 8 PORTER 2% 1 snore BHO HSLAYED ungroamjaintpremsaes omy OLLI 68152 PARTTWO. Fra Ssumr nd neem ic Peg CHAPTER ores Fri Somtene 83 basis Foreach oe flleving in compar and sca ae emote pte Questions and Problemsats aon pn eer, THES SOTOONRD ever wp owes 9] 9 eS BEDE PPE! nowarbo ee con ep an ee Fe osm sae seis EL sure genoa sanezay cum Se (oe-01 ann} SINIG2¥BLN sm ent ogg 2p do seg ED WON PENIS songs an sees Pres 58 cues mom CLAY ungrowyumtoyqursiunns oem ONLINE HEab PARTTWO. Fr Stem ad Lange Fc Pig 22. Return on Bquity Firm And Fir deta on lasses of 17 and 30 eumoa ety? 22. Colelating tho Cash Coverage Ras ot atpntandomsoment RANGE utzasse CHAPTER). WoniegnehFianlSnaness €7 mans caurso oe | naa | — ‘00 Drenn enone ent ts ‘oot tame Teste) ‘none ‘on aw ‘ottcvoninserinn a90. PARTTWO Fowl Sonnecr deem Fn Pring | CHAPTER Linge nc Rainy Goh 98 + To lop sip pep with consumer groups 1 ramets mgr of sil ling + To promote and ast aad in establishing a owe base for 4 The amount of Katy and working: sth fm networking capital dcisen, WHAT IS FINANCIAL PLANNING? 4) ing potesional sada it eapod yn st ope yar ef puoi not aud po pogo 590 a ng wn pon pu wasn pue Som Syst wo pas stn € 10 Ho on pa4sar 2g POW POSH PE =P WY TE ‘aoe 3 po Sue ssqoaco 39 e310 .9j woposd 0303 0 in|, PaBBHD powmEp wy Spo aK “Suni nd ooteyse 5 sero a fg ome rata wedun Aaepanre {6 paoopebuenymenauaLey yyRLAVHD94 PARTTWO. Fri See ng Tem ra ag CHAPTER Longleaf Pningind Geom 9§ Conclusion Probaby ite nas: imponantesuk of he pling proces tifoces Asset Requirements Th plan wll devi projec capil spewing. Ata mine 1 Concept Questions | ened ae “ta Whacee ho dnasoe ofthe fc pig proces 1 Alb Wy shal dr pean pot I ide a eton om he neces fate art of te plan sould isco dividend policy and deb poy FINANCIAL PLANNINGPeL—— OLOOS a, ‘ab ia eo woredoae—_eseey rey sepeppoSecod ty Uh qeneypertemmaronsg ay Sey puBLaviED ewggrencajaunpaneanins EK OMIA 16CHAPTER 4 Lengo Fi Piya Gant 99pon ouog ietooano | BE RE a nearer age a8 ma a ° seedy os us srniad uy oe sn ing eax nonaig GRA ap eau) vee Hele: aro rs aun posg eats prwcs tg OM La 0 SV STEVL | | | 10) oipmetmey spay mart yaLANamin et uweGe Netra Yer te Yer Ay Es oar ost 2a tat Nootécoyte 18 0 6 8 Low estone oe a 350 0 ‘Wis tes us that Rosenganen need $1.82 nie assets for evry $n sas once Ieaches ful capac, Ate poate sls iv! of 3280, than, Weeds $1,250 1.62 $2,005 in od assets. Compared othe $2250 we egal poeta ths is $225 65s, so EFWis 505 ~ 225 = S40 ‘Carer aca woud sil be $1,500, co tot asa woud be $1500 + 2025 = {$9825 The captalntarty ratio would hsb $2,55/1,250h= 2, shan or Ilva of Bocuse ofthe excess capaciy, neste 03 ost an wn ‘esr ago PS on on 308 sat ‘et Faring De 19.81.04 & Set Reminder Rovere Eo mete Henrie er Year yin a) a) 3 owesme ee) er) p38 3 488 nie 0% NA 8% 50. lene 00, roving $8 the flog ble conpering MMM wo ne Concept Questions 434 Vian eas Ab Unter mode wh see cpt gel 44 EXTERNAL FINANCING AND GROWTH expense dou SRP hap Hi earls ten)is ve 90s a 2 © ot ver e 8 “ ze 2 2 5 buoy oe ovis ons og wa eon 285 oa aaa ——Stauey Cay aD Paeierd RSAC) — wbgteeg. "Buona. peng AL oe | man S01 asin peony me eT ARLAHDPARTTWO Furr eon em Pl Pa, CHAPTER Loge Fes Pngsnd Ge 407 | Em sei: lana Comay ep ataminam tf pep — Growth nd Related 18 Financing Nested ani jainable Growth Rate We hae sen fete Han a cara of 9.65 per Rte ‘Asset needs and retained earings “<< EXAMPLE 4.2 Teaog ftp vio» Brung cin soo RES nu pnouse oa eo vos ae unasew ay 4 wae eeu sory 8029 ongemng poe rosea ge Kung Se FE Arbo noua ps sors set saree, Sa FS sect ‘ie wo -areauiad ayqutedowo fun 0280 euypony ase (asa pds 20) sonouar rere fen pu hayod UE “foged pumpin yo. sy pe bo nau as 08 3045207 wl CH | Gat ommopnseonanmsemintin »yatdvi> 4| cay te ee rave nd | prt repeal. kr tna a sever wap ick cnparzen of ei Po es iy An pn eo ipa en nd Sustainable Growth cat in ia, as aay rai of 5, a ro rd payt roo 0 paren, and a capt ens ai oft Whale etaeslegromtree Babar cesiod 216 pcan sustainable growth rai and phn to acivs hsgoaltygroong prof args, what wold you thnk? OE is 05 «1 x 15 = 45 pact Th etnton ais 1 ~ AD= 60, Sutin roth thus 45.60/01 ~ 064.80) = 2.7 parent For Babar to achieve «10 seca gmt ee profit marin wil have to ie To seat, ecure iat evtinstle growth eu to 10 pacar an ene fr pro nag Fa a0 ee) PM = 1/99 = 101% coed, ha neces Forth plan CHAPTER Loge ried Goh 11 4 Concept Questions Fn Which darian of pow? How safes roth aed 0 sezenting etn ety (ROE SOME CAVEATS REGARDING FINANCIAL PLANNING MODELS Concept Questions © 4a Wear semeinparant amir Ba fan isi ra phng secs! 5 4.5 iy dome sy ling ante roe Cash Budget Shorter Finacial operations ar‘omg torn en ny reer RTA, eae _ asad g Suu ote pny pede wa py Bae ‘NE SHDN" Tp mGeg wy oeRENBN| HOPING eBN FAPEEED PUE NA apy x so0e — 1 ¢ BOUT soy x ior” «9x EOW ay eae ma a 08 58 = ONCE sg xH6UT—1_ «VOT coor x 96009 KVOR ‘avis Coon Semin ton suru) boxes poo 60 sso, “Lang = OF 1 OSC 15 990 PEG SSN Nos tort og Sue Seu eau ox] a uma fq IED HEIN TY sy pram ent pe sine s OMAN ZICHAPTER Lingle Foc Pagar 15 ‘onions besides expansion of copay) re avalible company whos one exceed copay? Questions and Problems | 4, Pro Forma Sistoents Cos BASIC tie KL Tole Company (assuming {econ 115) Income Sttenent «lee heat es Tom pees” tagm Oe RIO cos Ely 3.00 fom fem tal lato aspect tht every tem 08 Create th ee farms stents Tavs 83) att Nitheore $208so ap ouoye As on pes sea aa 2orsq wo] oxtw andar supp om op uno son , i H pst ney wes stone md pe seo eou un ny -paoe eS smon EIR ONES eaNg aan aT | sone ENG Hp} HRI SON uyeoges ep) suooey ean oxg Dy SoqUg YoY IAREHORD % 111 inp tremu rom way By pyRLIMH Sungypicasincherpuoumagyoie OMI PIE1b PARTTWO Fanner Lago ie Pig 14. Sustainable Growth suing the following its ae comstany,wh sestaiable growth ate? “oul set umover= 190 Poot magin = 76% quiy ulipier = 130 Prycatrtio = 46 1S, Sustainable Growth Buse on the fllowieg infomation cau the susinable pow ato for Kle’s Kies Proftmargia = 89% percent of yop HK os before cargy inthe resis pale, sp xe projet goo Au8650,00, ate Oerepeses Exegesis bt pl i esr en sw co neue “area su ee ‘aera fe sme ft et eg ae wae on = as Frode, “ade “Total equity = 48.000oy a 8 2 —— ea ine SUOOT? ane merocuen-enw mete | CrIVANVES up “abo pound aE 0p mga 4 HOR Meng yr ane 3 Suton aya passes an Darren ceETTTY ry ames HAY CF en ean a > oe erst eo 00) BONSTIVHD ado sen au oss way sc ICL wopombieanminy ume) BLAM Dnitgyiy iy Sepa) OIMLLAVE OLMINI-CASE >> Ratios and Financial Planning at S&S Air, Inc. Questions Petweahedoxnings 675410 “onoure tates Asogram ae Stat eaty E i i~~ SNIGNNOdWOD GNV 3NTWA 3NLNS StI fqupeomauuseriennnevenzao §YBLAWN wee pound nance tn pt wo topo oie arpa ul pe oa et Lea ‘ops 0 pep open eae ‘ea uay na eo ve spomn jpmea soluatpan ‘te aquodncs ton Aauoy JO anye, aw SUOIJEN]eA 0} UOIIO POsqUy126 PARTTAREE Wona! fre Cab fons CHAPTERS oda tenon TT tec Memy 127 TFEXANPLE/E.[; > Interest on Inte ‘he growth of your MICO each eur silted in Table 5.1. A stow, vemet ttn tone rectyies | | Ita alten yers?Howmacttionseee | | | pow net? | ye ou wl hav GRD (-+.14) = RMSTOSD. you racecod yet Thetis you sami ts RMM207- ‘OE 7. You S25 rig inci ees PMQ2S 14 = RANG. interes each ‘yea for tvo-year tet of PMO in sng tee The emaining RNQ7.37 ~ 91)= se, Sap uss 4 — Intars, Compound Interesteyed 2 fed pg ous Ue P0104. ae ~ s2s03uy punodiuog 121 moa poqausu rameg)crvpaan suaLanD “wag a0 O13 238 rk ee pp 1p am a as yo (oss au, oe mayor onny ne, asuusive 2CHAPTERS. fecdetoneHiuior Tine ong 131 ‘eae to apr rant he ou mo ety ace hn ed odo sey time you work pn. Thetings youn wie allo eal ting. als we ae dese te ning on sig oe,“sen ony Ban 2704 a HOLS GPF BLN OE ME 7 ‘oa ELGv = L90'/coneantH = 60 U/oa an = Ae sje ssmsp 0 w pseg op ard 6 = Baunsse “geak any wpe 343 on'aar 0 ee sad a SoH Of PERU 9A EU, (ned orn avd verde ae 2 Uns ean polo #6 yo pone and 80 a NE PH 8, ra = G00 x SH = gras enh os ‘ne esa ou 2 608 NOU WED A copra 201 x amen ed sah Purp en Be wo pap weak ye dy i pseame 2 Be ‘99 1099 nh "HS ree PuBR RO eed justo uepedeD GOL, aL nein puapia <« guy 6 Bapsonens aod J yf uo RH P na ‘sepa de en Ko ‘nok vo ed wo uo oy 280K you GOGH Kg OOH woe ann sapere 20a ‘ooconp FE) bopsnrseuseionyyonepeay sua owen wiser, Sau AMNG BET134 PARTTHREE- Won Fun Ca owt ‘Yous pesen va robes 092 faecal cr jot ample we jos xsd he ese ale of RIL LO obese n te eo 1 ern, yo wel {ote flonng 4 a] ve of RMI (00 to be eid in ee fates 5 alt ® 100 we fmm j| ow | al 85750 © Deceptive Advertising? “BAM Z CHATTER tootasieacen TeTine eather 135 Business somtimes advo you should "Came ty ee pod you do, wl gre you MICO stor coming by! Fax aadthe ie re, whe oid at sta hy wi gh youa sa at ilo you RIOD n25 yer or. she gong twestatecnsuch cpr yea how mach thay ey gig you | toxay Prosant vale of $1 (RM) 829 x FOY100 = RME.23. Maybe is ercughto decors, uti ot int youre actu ger is the presen va of REMOD tb pain 25 yeas. ihe ‘Secount rates 10 percent per yas ante deco Satori 25 years wortha te mae han ri ants today, acum te. Given ths, he promaten i actly paying you aboutsusan pated payed sv0 ua urs ny UR DY nH BaD y AU oa aR 2°79 ogee swan 8 ops ou Sen oD JeRED BUS vo 9sKmue O Ed SUE UAL ‘SEEM Yo ea ona oop 90 rE Og ata AO OR RES SL SSOOEN = 185 Y/oUrrs =H = LH + sapsoed poner cont ag anor yy sus ou a ume yo 8 peo 2905 Dorr oe fs waussany pesca a oreo aso = vere gos = x scanty = + seo yon 9 0 ae ys ep nak asd 3 ‘smyaage gh 9 an a co ees CU hy WoHasb onb wp. AL LE frau psoyaee a. sonoyyensearpn) swaLAVID r 9 (6 peppy oH as oH er asap PRD On, nye A asngng snssaa juasosg SAN TVA 3UN.LNS ONY es ANIS3Ud NO SHOW poind ads pe icop Reunmespewd a pause ager My PaRBN an IR ET PS aes 0%) noe ke KEP BUR 3S suopsand 3da9u0c) ‘sno eng 9 ep gms aupepamnoumes, ssMHL 9138 PART THREE un offre Coho EXAMPLE S.i0 yn ie T clue the etn, we can ite th base preset vale eo MIG = RMON +16 ‘We now med tose for: There ar thes ways we coal 1, Use aia 2 Salvethe eunon fr I+ r by eaking the ight oe bo So, woul the home na ball have Boss & god invent? By he Rul of 72, you steady ow na sxparts wos peccing te all wold dela lin 0 othe een peeled would be about 72/10 = 7.2 percent per year which i ‘CHAPTERS invibioteWhasarTaThei Mwy 139 wing tse tambo. Fer 100 200n¢00 win]Guo fous in wo eed gue us nak vom Ez aE Na As oj wou puSq i s28 MeL TuaduogWpeH ang oY NBS Hag 205, i 0 15 Buy _ TEESE: » a A VED RO 9} SUS OH ATEN AIH OL one gH ft oon 0's» ooo Us 04 ane 6 0 Pod Kop wT > a1 14 poy co by ety coy sHevoR Se BK QS USN O} oH IN POA, owinipoy 09 eg $7908 ANO ge BLL aT 15022 = yuuseee= s+ 5072 = oo se/eou68= +H) 16 PARTTHREE. sna ere Coes % 2 Caleluting Fare Values For cach of following, compas te fue va: % ‘3. Calculating Present Values Foreah, Prose Wue Yrs net ate Fat Vloo Provriise Yous inte! fite Faure Vue owing, comput te Prose Yve Years inert ile Fue value Interest Rates Solve ote unknown intra ine presale ofthe Ru as mar the Number of Perio Sob forthe nso somber of year in me as nae 0 7 out CHAPTERS estiontsttasouTheTinitecMimy 147 INTERMED! fQeesions R020 no ye at 5 paren yercw vevouna = ooo +605 x oe’ rey not eK uD085 0 PY 5s = oo’ + Osx one a pk KS ag 0 PTY evwafo} 20 apa 24 28 meas oy unazoe a wong aN s%E4 a.auro Isa 00 @ Bed ode WegE ye on resp 0 we oul KH BOBEP FE 99 PKA MOA “Ve snanwas > paaspou dn Sues sent np aie 2 ac psec, 9a sa nfo sa aa ps fon pico no at ne pga sed a en ‘sou panaun nope suo we pale se U5 ZC POE ee Pace ‘aor Bonnsest sep sae ous nd a, v9 SMO'1d HSWS S1dLLINW 40 SAN TVA “LNaSaUd ON SUNLNd : Ta a aon a Sareea ae IFENTEA MO}-] emi) * rv EO"E Ysed payunoosiq sons, Bap poe Bute 6r1 corns abana 9 yaLaNiD180 PARTTHEE zen Fee Repeating his rh hr year ves: amg 8880 x 108+ 4000 = NH 803.52 forward vy. The est RMI so dpe for “Time Line for $2,000 per Yar fo Five Years Gea ° 1 2 3 ‘ ‘ fwegoo —manzoooUZaco p00 MONO UTE) atc Value Calculated by Compounding Forward One Period at Tine ° 1 2 2 4 5 betassaoe crt 9 Sapegene Eng anaint i zzcopAME20 AUT 82 mas em, au" me CHAPTERS: DacuredCim fowl 151 Tine Fp “ond fuure vate RAZED Fig 64 goes though sesame cleultions a the Secand cig is sed. Net rly he ansver isthe sae, ‘Siving Up Once Again you depos FOr100 one yar, 200 In oye, and FVEOD in es yers, hoor ‘uc wl you haven thes years? How mucho ths is iterest? How much wi ou fave fv yore # you dor a6dadtonlaneunts? Assume a7 pear est ra treghout ‘We wl cautale he fre vl ofeach mount a hae years Nc hal the A110 ears interest for we yer, an to U2 eas inert or one yer. The Sal NNO ems orto Th hare vas ee ths itioa x 178 = utzon > 4.07 = sro =_ 30000 Total re ve =A ‘Theta utr vi thus AUAB8 42. The otanterst is: uezs.48 — R00 + 200+ 30) = Aza asic x 1.07 RM x 1.308 = AMT 08 uso x 107° =Rioo0 x 12250 = 26601 + AMMO » 107? = PvGOD 1.1400 = 3.47 je = ATID [eFicuRess Future Yale CCaleustedby i Compounding Each | (Cash Flow Separatelysues NO — 0s 09995 + s'19 AN = o's + 14s aoa) + 84 eons AND) seek ey sang ese 944 sp cama ogee 808 LN on 2 84 FPO HOS WSO sou eg emg be wea ue nk sak Hog RE PSI Aipertng meqy oe, tomo 0971N) ono oor) oe fapneneny mea stg sn 8 r . 2 t ° SEE “Fd Bano prs rok Ue SSH OF EY WF Na ED weuasany a ang uo of vag Kaunas D Wan 2) ID UD OK ung Se, wont ‘ap pn gross Drees'ZH = (out + OF ee = GOTTA «(90 no 59 € Je 9 8 PON S00 EOL OOS UM HAD AL rept = Got oF FOR oO + Joo PUENTE = 6/7 BR 7 ooo. ves wn 3 | =n aunye pau sno eg ncn fap mA HH Smo}d YSeD aIS]My Yam onyeA Wwas9rg 81 cpnyonueoeinena puna ayes, asuniumed TS184 PART THREE wont Fuse Ca Foe CHAPTERS Obcomtes Ci flonan 155 How to Calculate Present Values with Multiple Future reer Cash Flows Using a Spreadsheet 2aeresr 250655 ‘apt at mt: | | | Ths sas we pewcusly clued. The pon we want to mae i that we can eclolo 1 comer Bebven tha using water way ay be sre a og a wo lek th Ing sare discount at an are crf to een tract thei uber of pas How to Calculate Present Values with Multiple Future Cash Flows Using a Financial Calculator ioe AMECO RAO 20 ene be eng of ef ct owsomez wick mossy ° oes eam aorta + core wee avd RED . as sare see 2 oe eae oe 98 4 oon eT A raeyg VY Es goes 0) 39051 9 ra ss ‘ede nov of > OK} ODE NIU cei = On.6 ze x Zea = oEA HOS “se wee ze quewhed py 2 sme nea a INRD UR 2; SH es 8814 — 1) = 0085 hd KY S52) anes nae nase ey 6 9} AE eupio vat sauies vt ay) WOU sd poDed | Ye NOU 1} HE mS ZL yroseg nok UD es Woe OL 25 RU 1 yee Go pao ay a ua P98 OK ce Nao HRD # vO HE HS zea fd 0 peo ok pean exe NX afer DK Ao GOS AMD AY SHepaima | Ht pany 90, N60 SPM MOH 151 mgnou ope puRLaN SHILINLadYad GNV S3ILINNNV 4SMO1d HSVD 13A37 DNINIVA ayudar arog porinad 09 Ye ‘ua np woge oun le op yu sso es dae aA suonseng 3820009) cy meyyenypcoiny, aa ve FS)158 PART THREE Wssonlfeae Caos CHAPTERS. Otscmad Cm Hom aon 189 Present Vaiues HE Annvity Payments Sohetor Ast we gta mate sgn ane PY Annuity Payments Unga ses wort sre ren ges it SPREADSHEET stratecies Annuity Present Values b Uingaspeabea EXAMPLE 66 tale onthe cd ce 9 15 pecent pr mont, How long wil you need o pay off | tne aus.oo0? | What we hav here aru of REO porn et 15 pareat pr meth or come"wie=1 “soya e990 “soucese—snwstaz __L00~S00 ‘owose~@raus ise” 7-00 snogey sero ap tae amo He an AON op tupecaa io THE O11 1 soummpscuyeapaing juntami> yo endo comes 29 1g SEAR YS 594 28 08 "Tere 530) gt a3 Seamie2a op-ompete wow eu ya, Sywawed Jo saquiny ays Supury oogerpemngyovomrg sam Luve OFT(CHAPTERS Dienst Cah Rowton 163 62 PARTTHREE Vintonot haw Ct ws atc that t 65%, he PY ie RVDSS,86712, su yo can gt mee sect never by inerplting btwn 6% and 7, solos 5.067.12~290600 56.12 = BLO Puture Values of Annuities his pola nga etry ding lenin: 8 2000 Finding the Rate Aerie joucnt ue ai Enteryas oy fn08 a yon pains ‘2400 See mg Cans BUEN Fy VEN Kare LO LREL-DBSOHO ru as 2 pyr aout 8 soy Guputsro pea pays avai oss pu ‘on yam aS Ook W008 Leja asc sue og MUS Buy ESE 2 uo pase hu ae ped eq ru pumpin SL YHA VE Kans posed fre poop uses pry pam a 2hng a pa pause spe uoyod noe way fanedied oo puoi umyedu Las foe oud ¥) yoo peu pos pesiayeid esq ou ae 66 om pus 290 Pe LG pA PH omg insu asypow =p Sree) i ‘punpoenspons modo wf IBBEC RL SpDA5 8 ARID SURG AN ETHNOY [iseateal s yan wakeg ran —es 10 deg 0 889)) Ca a “yt 86 salon anurans ao nes Ms ge 5H CE TN HATO “ome Pee one douer so ogaHtd = 9 (een) x0» counts = ene wen euvens ag nu pespnpen conn saciaeen asad aa | ts vevenb sad ed 2A oa OH pm anes gnu mL? eA OL wse=2 fa) 1s = ong = ene Beng eta. ae emerson | “fama 8 ‘ove moe ys® © pu ore Joon EOE SE [ oyeosnnyjesemeny smAL is 99! Sm menauieo manera ania166 PARTTHREE. Woon tre Ca foe ‘Summary of Aruity and Prpeuity 4, = Fume ve, ht xs owt wort a Caleuations = retro fe or dou ep peo play baat aways, COMPARING RATES: 6.3 ___THE EFFECT OF COMPOUNDING _ 3 X05 = 2530, Tose viyitisinperast to workon sect pw he following the aes te somite singly a: CHAPTERS. Oscxnat Cabin on 167 i ates spot you've shopped sound sated intrest ate