Visit www.dummies.com/cheatsheet/corporatefinance to view this book's cheat sheet.
Corporate Finance For Dummies
by Michael Taillard, PhD, MBA
Corporate Finance For Dummies
Published by
John Wiley & Sons, Inc.
111 River St.
Hoboken, NJ 07030-5774
www.wiley.com
Copyright 2013 by John Wiley & Sons, Inc., Hoboken, New Jersey
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions .
Trademarks: Wiley, the Wiley logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com, Making Everything Easier, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc., and/or its affiliates in the United States and other countries, and may not be used without written permission. All other trademarks are the property of their respective owners. John Wiley & Sons, Inc., is not associated with any product or vendor mentioned in this book.
Limit of Liability/Disclaimer of Warranty: The publisher and the author make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation warranties of fitness for a particular purpose. No warranty may be created or extended by sales or promotional materials. The advice and strategies contained herein may not be suitable for every situation. This work is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If professional assistance is required, the services of a competent professional person should be sought. Neither the publisher nor the author shall be liable for damages arising herefrom. The fact that an organization or Website is referred to in this work as a citation and/or a potential source of further information does not mean that the author or the publisher endorses the information the organization or Website may provide or recommendations it may make. Further, readers should be aware that Internet Websites listed in this work may have changed or disappeared between when this work was written and when it is read.
For general information on our other products and services, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002.
For technical support, please visit www.wiley.com/techsupport .
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com . For more information about Wiley products, visit www.wiley.com .
Library of Congress Control Number: 2012952209
ISBN 978-1-118-41279-4 (pbk); ISBN 978-1-118-43478-9 (ePub); ISBN 978-1-118-43481-9 (ePDF); ISBN 978-1-118-43484-0 (eMobi)
Manufactured in the United States of America
10 9 8 7 6 5 4 3 2 1
About the Author
Michael Taillards other works include Economics and Modern Warfare (published by Palgrave Macmillan), and 101 Things Everyone Should Know About the Global Economy (published by Adams Media). After spending several years as a university economics instructor at several locations in the United States and China, Mike decided to leave and become a freelance research experimentalist. Mikes work so far includes economic research projects for The American Red Cross, a theoretical study for the United States Strategic Command (STRATCOM), and award-winning research through a private school and tutoring company designed as a philanthropic experiment in macroeconomic cash flows as a form of urban renewal. Mike has also appeared in documentaries such as Dead Man Working. Mike received his PhD of financial economics and has an academic background that includes a masters degree in international finance with a dual concentration in international management, as well as a bachelors degree in international economics.
Dedication
This book is dedicated to my family back in Michigan.
Publishers Acknowledgments
Were proud of this book; please send us your comments at http://dummies.custhelp.com . For other comments, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002.
Some of the people who helped bring this book to market include the following:
Acquisitions, Editorial, and Vertical Websites
Project Editors: Kelly Ewing, Tim Gallan
Acquisitions Editor: Stacy Kennedy
Copy Editors: Amanda M. Langferman, Christine Pingleton
Assistant Editor: David Lutton
Editorial Program Coordinator: Joe Niesen
General Reviewer: Jill Lynn Vihtelic
Editorial Supervisor and Reprint Editor: Carmen Krikorian
Editorial Assistants: Rachelle S. Amick, Alexa Koschier
Cover Photos: Stephen Finn/iStockphoto.com
Cartoons: Rich Tennant ( www.the5thwave.com )
Composition Services
Project Coordinator: Patrick Redmond
Layout and Graphics: Jennifer Creasey
Proofreaders: Lindsay Amones, Lisa Young Stiers
Indexer: Christine Karpeles
Publishing and Editorial for Consumer Dummies
Kathleen Nebenhaus, Vice President and Executive Publisher
David Palmer, Associate Publisher
Kristin Ferguson-Wagstaffe, Product Development Director
Publishing for Technology Dummies
Andy Cummings, Vice President and Publisher
Composition Services
Debbie Stailey, Director of Composition Services
I n case you couldnt already tell, this book is about corporate finance. If you were looking for poodle grooming, you picked up the wrong book. Go try again.
Corporate finance is the study of how groups of people work together as a single organization to provide something of value to society. If a corporation is using up more value than its producing, it will lose money and fail. So its the job of those in corporate finance to manage the organization so that resources are efficiently utilized, the most valuable projects are pursued, and the corporation can remain competitive and everyone gets to keep his job. You can do this task through a very easy process: measuring! In corporate finance, you measure value using money, and the final goal of a corporation is to make money. Why? When a corporation makes money that is, when its profitable that means its making sales that have more value than the things it buys; its adding value to society rather than sucking the world dry.
Ensuring that a corporation is financially successful is far more complicated than simply ensuring that a corporation is profitable, though. Throughout this book, I discuss a wide range of topics in corporate finance. This is an introductory book, after all, so think of it as a sampler or a greatest-hits album its everything you need in order to understand what corporate finance is and how to begin functioning on a basic level in the world of finance.