Foreword |
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xvi | |
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Preface |
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xviii | |
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List of frequently used symbols |
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xxii | |
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What is corporate finance? |
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1 | (14) |
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The Financial Manager is First and Foremost a Salesman . . . |
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1 | (3) |
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. . . Of Financial Securities . . . |
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4 | (3) |
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. . . Valued Continuously in the Financial Markets |
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7 | (3) |
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. . . Most Importantly, He is a Negotiator . . . |
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10 | (1) |
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. . . And He Remembers to Do an Occasional Reality Check! |
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11 | (4) |
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Section I Financial analysis |
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15 | (2) |
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Part One Fundamental concepts in financial analysis |
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17 | (104) |
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19 | (10) |
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Operating and Investment Cycles |
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20 | (2) |
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22 | (7) |
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29 | (15) |
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Additions to Wealth and Deductions to Wealth |
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29 | (5) |
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Different Income Statement Formats |
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34 | (10) |
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Capital employed and invested capital |
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44 | (13) |
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The Balance Sheet: Definitions and Concepts |
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45 | (2) |
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The Capital-Employed Analysis of the Balance Sheet |
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47 | (4) |
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A Solvency-and-Liquidity Analysis of the Balance Sheet |
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51 | (2) |
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A Detailed Example of a Capital-Employed Balance Sheet |
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53 | (4) |
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Walking through from earnings to cash flow |
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57 | (16) |
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Analysis of Earnings From a Cash Flow Perspective |
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57 | (4) |
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61 | (12) |
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Getting to grips with consolidated accounts |
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73 | (21) |
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73 | (7) |
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Consolidation-Related Issues |
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80 | (5) |
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Technical Aspects of Consolidation |
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85 | (9) |
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How to cope with the most complex points in financial accounts |
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94 | (27) |
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95 | (1) |
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95 | (1) |
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Convertible Bonds and Loans |
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96 | (1) |
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Currency Translation Adjustments |
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97 | (1) |
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Deferred Tax Assets and Liabilities |
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97 | (2) |
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Dilution Profit and Losses |
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99 | (1) |
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100 | (1) |
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100 | (1) |
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101 | (3) |
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104 | (2) |
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106 | (2) |
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Mandatory Convertible Bonds |
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108 | (1) |
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Off-Balance-Sheet Commitments |
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108 | (2) |
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110 | (1) |
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Perpetual Subordinated Loans and Notes |
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111 | (1) |
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111 | (4) |
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115 | (1) |
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116 | (1) |
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117 | (4) |
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Part Two Financial analysis and forecasting |
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121 | (138) |
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How to perform a financial analysis |
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123 | (32) |
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What is Financial Analysis? |
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123 | (2) |
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Economic Analysis of Companies |
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125 | (12) |
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An Assessment of a Company's Accounting Policy |
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137 | (1) |
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Standard Financial Analysis Plan |
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138 | (1) |
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The Various Techniques of Financial Analysis |
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139 | (3) |
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142 | (1) |
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143 | (1) |
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144 | (11) |
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Margin analysis: Structure |
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155 | (23) |
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How Operating Profit is Formed |
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156 | (10) |
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How Operating Profit is Allocated |
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166 | (1) |
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167 | (5) |
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Pro Forma Income Statements (Individual and Consolidated Accounts) |
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172 | (1) |
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172 | (6) |
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178 | (15) |
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How Operating Leverage Works |
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178 | (4) |
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A More Refined Analysis Provides Greater Insight |
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182 | (5) |
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From Analysis to Forecasting: the Concept of Normative Margin |
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187 | (1) |
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188 | (5) |
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Working capital and capital expenditures |
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193 | (24) |
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The Nature of Working Capital |
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193 | (4) |
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Working Capital Turnover Ratios |
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197 | (4) |
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Reading Between the Lines of Working Capital |
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201 | (6) |
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Analysing Capital Expenditures |
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207 | (3) |
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210 | (7) |
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217 | (15) |
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A Dynamic Analysis of the Company's Financing |
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218 | (2) |
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A Static Analysis of the Company's Financing |
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220 | (7) |
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227 | (5) |
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Return on capital employed and return on equity |
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232 | (20) |
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Analysis of Corporate Profitability |
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232 | (2) |
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234 | (9) |
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Uses and Limitations of the Leverage Effect |
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243 | (3) |
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246 | (6) |
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Conclusion of financial analysis |
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252 | (7) |
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252 | (2) |
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254 | (1) |
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Financial Analysis Without the Relevant Accounting Documents |
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255 | (1) |
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256 | (3) |
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Section II Investment analysis |
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259 | (2) |
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Part One Investment decision rules |
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261 | (124) |
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263 | (27) |
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The Rise of Capital Markets |
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263 | (5) |
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The Functions of a Financial System |
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268 | (2) |
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The Relationship Between Banks and Companies |
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270 | (1) |
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From Value to Price (1): Financial Communication |
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271 | (1) |
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From Value to Price (2): Efficient Markets |
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272 | (5) |
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Limitations in the Theory of Efficient Markets |
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277 | (5) |
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282 | (8) |
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The time value of money and Net Present Value (NPV) |
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290 | (19) |
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290 | (4) |
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294 | (2) |
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Present Value and Net Present Value of a Financial Security |
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296 | (1) |
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297 | (1) |
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What Does Net Present Value Depend On? |
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298 | (1) |
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Some Examples of Simplification of Present Value Calculations |
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299 | (3) |
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302 | (7) |
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The Internal Rate of Return (IRR) |
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309 | (18) |
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How is Internal Rate of Return Determined? |
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309 | (1) |
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Internal Rate of Return as an Investment Criterion |
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310 | (1) |
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The Limits of the Internal Rate of Return |
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310 | (7) |
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Some More Financial Mathematics: Interest Rate and Yield to Maturity |
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317 | (10) |
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Incremental cash flows and other investment criteria |
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327 | (18) |
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The Predominance of NPV and the Importance of IRR |
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327 | (2) |
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The Main Lines of Reasoning |
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329 | (4) |
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Which Cash Flows are Important? |
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333 | (1) |
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Other Investment Criteria |
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334 | (11) |
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345 | (22) |
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348 | (5) |
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353 | (4) |
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357 | (2) |
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Putting Things into Perspective |
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359 | (8) |
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Risk and investment analysis |
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367 | (18) |
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368 | (5) |
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The Contribution of Real Options |
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373 | (12) |
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Part Two The risk of securities and the cost of capital |
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385 | (88) |
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387 | (32) |
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387 | (2) |
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Risk and Fluctuation in the Value of a Security |
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389 | (3) |
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Tools for Measuring Return and Risk |
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392 | (2) |
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How Diversification Reduces Risk |
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394 | (2) |
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396 | (5) |
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Measuring How Individual Securities Affect Portfolio Risk: The Beta Coefficient |
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401 | (4) |
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Choosing Among Several Risky Assets and the Efficient Frontier |
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405 | (2) |
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Choosing Between Several Risky Assets and a Risk-Free Asset: The Capital Market Line |
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407 | (4) |
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How Portfolio Management Works |
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411 | (8) |
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419 | (24) |
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Return Required by Investors: the CAPM |
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420 | (4) |
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424 | (1) |
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The Limits of the CAPM Model |
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425 | (4) |
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429 | (3) |
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The Cost of Equity Based on Historical Returns |
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432 | (2) |
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The Cost of Equity Based on Current Market Prices |
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434 | (6) |
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A Formal Derivation of the CAPM |
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440 | (3) |
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From the cost of equity to the cost of capital |
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443 | (18) |
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The Cost of Capital and the β of Assets |
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443 | (1) |
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Alternative Methods for Estimating the Cost of Capital |
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444 | (6) |
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Some Practical Applications |
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450 | (3) |
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Can Corporate Managers Influence the Cost of Capital? |
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453 | (2) |
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Cost of Capital: a Look at the Evidence |
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455 | (6) |
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The term structure of interest rates |
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461 | (12) |
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Fixed Income Securities and Risk |
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461 | (2) |
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The Different Interest Rate Curves |
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463 | (3) |
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Relationship Between Interest Rates and Maturities |
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466 | (3) |
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The Stochastic Approach to Modelling the Rate Structure |
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469 | (1) |
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469 | (4) |
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Section III Corporate financial policies |
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473 | (2) |
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Part One Financial securities |
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475 | (160) |
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Enterprise value and financial securities |
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477 | (8) |
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A Completely Different Way of Looking at Things |
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477 | (1) |
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478 | (2) |
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Overview of How to Compute Enterprise Value |
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480 | (1) |
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Valuation by Discounting Free Cash Flows |
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480 | (5) |
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485 | (27) |
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487 | (2) |
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489 | (3) |
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492 | (3) |
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495 | (4) |
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The Volatility of Debt Securities |
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499 | (4) |
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Default Risk and the Role of Rating |
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503 | (9) |
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512 | (26) |
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General Features of Corporate Financing |
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512 | (5) |
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Marketable Debt Securities |
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517 | (3) |
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520 | (7) |
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527 | (3) |
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530 | (3) |
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533 | (5) |
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538 | (18) |
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538 | (7) |
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545 | (3) |
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548 | (2) |
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Adjusting Per-Share Data for Technical Factors |
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550 | (6) |
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556 | (21) |
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Definition and Theoretical Foundation of Options |
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557 | (2) |
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Mechanisms Used in Pricing Options |
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559 | (2) |
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561 | (3) |
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Parameters to Value Options |
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564 | (2) |
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Methods for Pricing Options |
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566 | (4) |
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Tools for Managing an Options Position |
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570 | (7) |
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577 | (24) |
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578 | (4) |
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582 | (6) |
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588 | (3) |
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591 | (10) |
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601 | (34) |
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General Principles in the Sale of Securities |
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601 | (6) |
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Initial Public Offerings (IPOs) |
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607 | (6) |
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613 | (5) |
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618 | (2) |
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620 | (6) |
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Convertible and Exchangeable Bonds |
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626 | (1) |
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626 | (9) |
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Part Two Capital structure policies |
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635 | (118) |
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Value and corporate finance |
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637 | (20) |
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The Purpose of Finance is to Create Value |
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637 | (3) |
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Value Creation and Markets in Equilibrium |
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640 | (4) |
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Value and Organisation Theories |
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644 | (6) |
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650 | (1) |
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651 | (6) |
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Capital structure and the theory of perfect capital markets |
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657 | (11) |
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The Evidence From the Real World |
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658 | (2) |
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The Capital Structure Policy in Perfect Financial Markets |
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660 | (8) |
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668 | (30) |
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669 | (12) |
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681 | (6) |
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687 | (8) |
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The Capital Structure Choice: the Endesa Case |
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695 | (3) |
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Debt, equity and options theory |
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698 | (18) |
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Analysing the Firm in Light of Options Theory |
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699 | (2) |
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Contribution of the Options Theory to the Valuation of Equity |
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701 | (3) |
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Using Options Theory to Analyse a Company's Financial Decisions |
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704 | (4) |
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Resolving Conflicts Between Shareholders and Creditors |
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708 | (8) |
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Working out details: The design of the capital structure |
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716 | (37) |
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717 | (5) |
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Competitors, Lifecycle and Other Capital Structure Determinants |
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722 | (4) |
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Other Factors Affecting the Capital Structure Choice |
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726 | (3) |
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Effects of the Financing Choice on Accounting and Financial Criteria |
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729 | (4) |
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Working Out the Details of the Capital Structure |
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733 | (8) |
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Capital Structure Policies: a Look at the Evidence |
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741 | (6) |
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Capital Structure Design: the Alitalia Case |
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747 | (6) |
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Part Three Equity capital and dividend policies |
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753 | (56) |
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Internal financing: Reinvesting cash flow |
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755 | (13) |
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Reinvested Cash Flow and the Value of Equity |
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756 | (3) |
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Internal Financing and the Various Stakeholders |
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759 | (1) |
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Internal Financing and Return Criteria |
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760 | (8) |
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Returning cash to shareholders: Dividend policies |
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768 | (24) |
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Dividends and Market Value |
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768 | (4) |
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Dividend Distribution in Practice |
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772 | (6) |
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778 | (5) |
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Taxation of Dividends, Share Buybacks and Capital Reduction |
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783 | (9) |
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792 | (17) |
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A Definition of Capital Increase |
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792 | (2) |
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Capital Increases and Finance Theory |
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794 | (2) |
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796 | (3) |
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Capital Increases and Financial Criteria |
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799 | (10) |
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Section IV Financial management |
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809 | (2) |
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Part One Valuation and financial engineering |
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811 | (126) |
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813 | (31) |
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Overview of the Different Methods |
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813 | (1) |
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814 | (4) |
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Valuation by Discounted Cash Flow |
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818 | (8) |
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Multiple Approach or Peer Group Comparisons |
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826 | (6) |
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The Sum-Of-The-Parts Method and Restated Net Asset Value (RNAV) |
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832 | (3) |
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Example: Valuation of Ericsson |
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835 | (2) |
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Comparison of Valuation Methods |
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837 | (7) |
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Choice of corporate structure |
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844 | (28) |
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844 | (9) |
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Initial Public Offerings (IPOs) and Corporate Governance |
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853 | (4) |
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How to Strengthen Control Over a Company |
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857 | (8) |
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Financial Securities' Discounts |
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865 | (2) |
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Organising a Diversified Group |
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867 | (5) |
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Taking control of a company |
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872 | (22) |
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The Rise of Mergers and Acquisitions |
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873 | (4) |
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Choosing a Negotiating Strategy |
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877 | (5) |
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Taking Over a Listed European Company |
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882 | (12) |
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894 | (18) |
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894 | (5) |
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The Mechanics of All-Share Transactions |
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899 | (5) |
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904 | (8) |
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912 | (11) |
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912 | (3) |
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915 | (5) |
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LBOs and Financial Theory |
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920 | (3) |
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Bankruptcy and restructuring |
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923 | (14) |
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923 | (5) |
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Bankruptcy and Financial Theory |
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928 | (3) |
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An Illustrative Example of Financial Restructuring |
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931 | (6) |
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Part Two Managing net debt and financial risks |
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937 | (55) |
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939 | (17) |
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939 | (3) |
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942 | (5) |
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Cash Management Within a Group |
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947 | (4) |
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951 | (5) |
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956 | (16) |
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Reasons for Using Asset-Based Financing |
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956 | (2) |
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958 | (6) |
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964 | (4) |
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Consequences for Financial Analysis |
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968 | (4) |
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972 | (20) |
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The Various Sources of Financial Risk |
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972 | (1) |
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Measuring Financial Risks |
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973 | (2) |
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Principles of Financial Risk Management |
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975 | (10) |
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Organised Markets--OTC Markets |
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985 | (7) |
Glossary |
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992 | (10) |
Index |
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1002 | (29) |
Vernimmen.com |
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1031 | (1) |
Cribsheet |
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1032 | |