Foreword                                           xi
Acknowlegements                                    xii
Key for symbols                                    xiii
  PART ONE Foundations                             1   (44)
    1 Background                                   3   (6)
      Why do you need this book?                   4   (1)
      The form and logic                           4   (1)
      Method                                       4   (1)
      The philosophy                               5   (1)
      Excitement                                   5   (1)
      Data that make sense                         6   (3)
    2 Financial statements                         9   (14)
      Introduction                                 11  (1)
      The balance sheet                            11  (5)
      Balance sheet structure - fixed assets       16  (2)
      Balance sheet structure - liabilities        18  (4)
      Summary                                      22  (1)
    3 Balance sheet terms                          23  (10)
      Introduction                                 24  (1)
      The terms used                               24  (9)
    4 Profit and loss account                      33  (12)
      Introduction                                 34  (6)
      Working data                                 40  (5)
  PART TWO Operating performance                   45  (50)
    5 Measures of performance                      47  (10)
      Relationships between the balance sheet      48  (2)
      and profit and loss account
      The ratios `return on total assets' and      50  (2)
      `return on equity'
      Balance sheet layouts                        52  (5)
    6 Operating performance                        57  (22)
      Return on investment (ROI)                   59  (1)
      Return on equity (ROE)                       60  (2)
      Return on total assets (ROTA)                62  (2)
      Standards of operating performance           64  (15)
    7 Performance drivers                          79  (16)
      Operating performance                        80  (6)
      Operating profit model                       86  (9)
  PART THREE Corporate liquidity                   95  (60)
    8 Cash flow cycle                              97  (18)
      Corporate liquidity                          99  (1)
      The cash cycle                               100 (10)
      Measures of liquidity - long and short       110 (5)
      analysis
    9 Liquidity                                    115 (12)
      Short-term liquidity measures                117 (1)
      Current ratio                                117 (3)
      Quick ratio                                  120 (2)
      Working capital to sales ratio               122 (2)
      Working capital days                         124 (3)
    10 Financial strength                          127 (12)
      Interest cover                               128 (2)
      `Debt to equity' ratio (D/E)                 130 (6)
      Leverage                                     136 (1)
      Summary                                      136 (3)
    11 Cash flow                                   139 (16)
      The cash flow statement                      141 (1)
      Sources and uses of funds - method           142 (4)
      Opening and closing cash reconciliation      146 (2)
      Long and short analysis                      148 (4)
      Financial reporting standards                152 (3)
  PART FOUR Determinants of corporate value        155 (50)
    12 Corporate valuation                         157 (20)
      Introduction                                 158 (2)
      Share values                                 160 (17)
    13 Financial leverage and corporate            177 (14)
    valuation
      Introduction                                 178 (1)
      Financial leverage                           178 (2)
      V chart                                      180 (4)
      Market to book ratio                         184 (7)
    14 Growth                                      191 (14)
      Growth                                       192 (4)
      Analysis                                     196 (2)
      Growth equilibrium                           198 (4)
      Application to acquisitions                  202 (3)
  PART FIVE Management decision-making             205 (133)
    15 Cost, volume and price relationships        207 (32)
      Introduction                                 209 (1)
      Costing illustration                         210 (4)
      Contribution                                 214 (6)
      Break-even (B/E)                             220 (4)
      Contribution to sales percentage (CPS)       224 (14)
      Summary                                      238 (1)
    16 Investment ratios                           239 (18)
      Introduction                                 241 (1)
      Project appraisal - the problem              242 (2)
      Project appraisal - steps to a solution      244 (2)
      (1)
      Project appraisal - steps to a solution      246 (2)
      (2)
      Project appraisal - present value (PV)       248 (4)
      Project appraisal - internal rate of         252 (2)
      return (IRR)
      Project appraisal - summary                  254 (3)
    17 Shareholder value added (SVA)               257 (32)
      Introduction                                 259 (1)
      Description                                  259 (5)
      Approach to valuation (1)                    264 (2)
      Approach to valuation (2)                    266 (6)
      Value for the equity shareholders            272 (2)
      Discount factor                              274 (10)
      Terminal (continuing) value                  284 (2)
      Complete model                               286 (3)
    18 Acquisition analysis                        289 (30)
      Introduction                                 291 (1)
      Financial profile of Alpha Inc.              292 (2)
      Financial profile of Beta Inc.               294 (2)
      Acquisition - first offer                    296 (2)
      Acquisition impact on EPS                    298 (2)
      Shareholder effects - generalized            300 (6)
      Summary of effects on shareholders           306 (2)
      Revised offer                                308 (2)
      Relative versus absolute values              310 (4)
      SVA models - Alpha Inc. and Beta Inc.        314 (2)
      Addendum                                     316 (3)
    19 Integrity of accounting statements          319 (19)
      Introduction                                 321 (1)
      Where we focus attention                     321 (1)
      Operating revenue enhancement                322 (3)
      Methods of revenue enhancement -             325 (1)
      fictitious sales
      Revenue enhancement - clues for detection    326 (1)
      Operating cost                               327 (3)
      The balance sheet                            330 (4)
      The cash flow statement                      334 (4)
Appendix 1 Special items                           338 (13)
Appendix 2 Companies used in the sample            351 (3)
Appendix 3 Full set of ratio charts from sample    354 (17)
companies
Appendix 4 Discounting and compounding tables      371 (8)
Glossary                                           379 (10)
Index                                              389