Principles of Corporate Finance

Richard A. Brealey, Stewart C. Myers, and Franklin Allen (9th ed 2008, originally 1983)

Why Read It?

• Provides a comprehensive and practical introduction to the basic concepts and techniques of corporate
finance.
• Can be beneficial throughout your career, from learning the basics as a student, to job training, to
further learning such as an MBA, or as a reference for practicing financial managers.
• No previous knowledge is needed as the book takes you through all the basic information for
implementing financial techniques.

Getting Started
Principles of Corporate Finance is considered the bible of corporate finance, and is a teaching resource in
many of the top business schools; now in its ninth edition, it teaches managers how to use financial theory to
solve practical problems and to respond to change by implementing financial solutions.

Authors
Richard A. Brealey is Visiting Professor of Finance at the London Business School, and a Special Adviser
to the Governor of the Bank of England. He was previously a faculty member at LBS, the former President of
the European Finance Association, and Director of the American Finance Association.
Stewart C. Myers is Professor of Financial Economics at MIT Sloan School of Management, and a past
President of the American Finance Association. He is also a Research Associate at NBER, and a Director of
the Cambridge Endowment for Research in Finance.
Franklin Allen is Co-Director of the Wharton Financial Institutions Center and the Nippon Life Professor of
Finance and Economics at The Wharton School, University of Pennsylvania. His is Director of the Glenmede
Fund and the Glenmede Portfolios, and is Scientific Adviser to the Central Bank of Sweden.

Quotations
“Most investors are not adrenaline junkies; they don’t enjoy taking risks. Therefore they require a higher
expected return from risky investments.”
“Long before the development of modern theories linking risk and expected return, smart financial managers
adjusted for risk in capital budgeting.”
“Smart managers know that it is often worth paying today for the option to buy or sell an asset tomorrow.”

Context
• Enables a beginner to gain an in-depth and clear understanding of finance, investment, and the capital
markets, demystifying many of the more complex topics.
• Acts as both a practical resource and learning tool on all the main tenets of financial performance and
management, from the basic ideas on discounting to option pricing and innovative finance concepts.
• Explores both the theory and practice of corporate finance, as well as the essentials of economic value,
the function and structure of the firm, the opportunity cost of capital, the capital asset pricing model,
measures of return, risk return payoffs, financing decisions, and modern portfolio theory.

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Impact
• Useful not only for theoretical study but also for practical work in financial positions, and preparing for
examinations.
• Can be used for reviewing first principles, as well as integrating current research.
• Discusses in detail net present value and the best way to value a business.
• Incorporates lesson objectives at the start of each chapter, key points, and summary sections, to
facilitate learning.
• Provides straightforward explanations, diagrams, formulas, and examples, and explains the math used
in the examples.

More Info
Books:
• Damodaran, Aswath. Corporate Finance: Theory and Practice. New York: Wiley, 2000. Extremely
applied and practical.
• Ross, Stephen A., and Randolph Westerfield. Fundamentals of Corporate Finance. Chicago, IL: Irwin,
1995. Presents a unified valuation approach, with a management focus.
• Watson, Denzil, and Antony Head. Corporate Finance: Principles and Practice. London: Pitman,
1998. Accessible and concise introduction to the key topic areas, incorporating a range of real-world
examples.

See Also
Finance Library
• Corporate Financial Management

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