Pages: 4

This introduction presents an overview of the key concepts discussed in the subsequent chapters of this book. The book starts by looking at accounting statements. It focuses on the idea of free cash flows as a measure of new value created by investment decisions. The book delves into the oft-ignored but all-too-important subject of working capital management. It looks at debt capital by first examining what leverage is and how it works. The book examines the characteristics and usage of share equity, and looks at two methods for estimating the cost of using equity. It looks at the strategic rationale behind the numbers, and examines the different types of M&A. The book discusses how companies are valued and introduces the three most common valuation methods.

Pages: 10

Chapter 1 examines the accounting statements – i.e. the income statement, the balance sheet and cash flow statements – through the lens of corporate finance. It shows how the income statement is, in effect, a representation of both the operational and financial dimensions of a company. It also describes how the balance sheet should be read as being what a company has to make money with and where the financing comes from. This chapter is written in such a way as to help readers gain a quick understanding of these statements from the perspective of financial management.

Pages: 15

Chapter 2 focuses on the most commonly used investment decision tools, including net present value, payback and internal rate of return. In the process, this chapter also illustrates the concepts of the time value of money and the cost of capital. Managers and entrepreneurs who have to make investment decisions will find this chapter useful for understanding how the three investment criteria work, as well as their pros and cons.

Pages: 19

Chapter 3 looks at the concept of free cash flows and how it serves as the measure of the new value created by investment decisions. More specifically, it explains in detail what the three components of free cash flows – cash flows from operation, capital expenditure and change in net working capital – represent. The chapter also highlights the difference between cash and profit. Anyone who wants to have a clear idea of cash versus profit, as well as the concept of free cash flows, will find this chapter extremely valuable.

Pages: 9

Chapter 4 shows how the very important, but often neglected, concept of net working capital operates. Such capital, if managed properly, can reduce the amount of cash tied up in the business as well as increase the amount of free cash flows. It is therefore in the interest of anyone who runs a business to know how to be able to manage working capital properly.

Pages: 20

Chapter 5 examines debt as a means of financing. Specifically, it looks at bank loans and bonds. In addition to breaking down and explaining, in a detailed yet simple way, how bonds work, this chapter offers a view of how debt can provide advantages and disadvantages to a business. It is a must-read for business owners and managers who are considering using debt to finance their companies.

Pages: 19

Chapter 6 delves into another means of financing – shareholders’ equity. In particular, it focuses on how the cost of using equity is determined. The chapter ends with a discussion of weighted average cost of capital, showing what this represents and how it can be established. This part is also a must-read for business owners and managers, given that every company uses equity.

Pages: 12

Chapter 7 examines various rationales behind engaging in mergers and acquisitions (M&A), including in terms of operational, industry-specific, strategic, financial or personal reasons. It also explains in detail the common terms used in mergers and acquisitions. The chapter serves as a good introduction for readers who are new to this aspect of finance.

Pages: 21

Chapter 8 continues the discussion on mergers and acquisitions by explaining methods for figuring out how much a company is potentially worth. It covers the three most commonly used methods in company valuation. This chapter is designed for anyone who wants to attain a quick overview of how to approach valuing a business.

Pages: 13

Digital technologies have become pervasive in all aspects of our lives, both as individuals and as businesses. One direct outcome of this development is that people increasingly want to work in new companies or even start their own ventures, especially those involving technologies. As demonstrated in the earlier chapters, a financial and economic rationale underpins, if not dictates, all business operations and engagements. This, in turn, means that knowing how to formulate the right financial strategy is essential to meet many future business challenges as well as to realise companies’ potential, regardless of whether they are high-tech. After all, the business of technology is much more than just an idea around technology – what matters is fitting the technology into a business and monetising it. This chapter brings forward a few key considerations when looking at the financial management of growing a (tech) venture. First, it will re-emphasise the importance of cash, before thinking about putting a value on a new business. It then examines different revenue and cost elements that can help these companies grow.

Pages: 13

Chapter 9 centres on the big picture of corporate finance – a visual portrayal of how all the concepts discussed in this book are linked. Information presented in this fashion helps readers to see how the various topics are interrelated, thereby reinforcing their understanding of the subject of corporate finance. This chapter is valuable and useful to both new learners and those who are looking for a quick refresher.