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The AMA Handbook of Financial Risk Management

The AMA Handbook of Financial Risk Management

  • Author:
  • Publisher: Amacom
  • ISBN: 9780814417447
  • Published In: April 2011
  • Format: Hardback , 336 pages
  • Jurisdiction: International ? Disclaimer:
    Countri(es) stated herein are used as reference only
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  • Description 
  • Contents 
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  • Details

    Managing financial risks comes down to understand ing how to reduce a complex business environment into workable concepts and models. The AMA Handbook of Financial Risk Management provides readers with the tools they need for dealing with the most important areas of financial decision making.

    Filled with strategies, principles, and measurement techniques, the book shows readers how to: 

    • Categorize financial risks
    • Reduce risks from cash flow and budget exposures
    • Analyze operating risks
    • Understand assessments or risk and return
    • Manage risks in capital investment decisions

    Providing both explanations and practical applications, the book clarifies the factors that affect the value of a firm, considerations such as time and the proper use of debt, and risks inherent in the capital structure of the firm and the valuation of business combinations. This is a comprehensive guide that enables risk managers and anyone involved in the financial management of an organization to know what factors are at stake and how to protect their bottom line.

  • Part 1. Introduction to Financial Risk 1

     

    Chapter 1. Categorizing Financial Risks 3

    The Enterprise Risk Management Framework 3

    Risk Categories 5

    Financial Risk Management 14

    Conclusion 16

     

    Part 2. Accounting, Cash Flow, and Budget Exposures 17

     

    Chapter 2. Risks from Financial Accounting 19

    Overview of Accounting 19

    Accounting Principles 19

    Categories of Accounts 21

    Trial Balance 24

    Financial Statements 25

    Conclusion 28

    Chapter 2 Appendixes 28

     

    Chapter 3. Managing Operating Cash Flows 33

    The Cash Flow Statement 33

    Cash Flow Exposures 37

    Conclusion 40

    Chapter 3 Appendixes 40

     

    Chapter 4. Operating Budgets 53

    Nature of Budgeting 53

    Forecasting Revenues 54

    Life-Cycle Stages in Budgeting 57

    Risks in Revenue Forecasting 60

    Expense Allocations 63

    Accounting Budgets 66

    Cash Budgeting 67

    Details of Budgeting 70

    Conclusion 72

    Chapter 4 Appendixes 73

     

    Part 3. Analyzing Operating Risks 85

     

    Chapter 5. Profit Planning 87

    Planning 87

    Breakeven Analysis 89

    Profit-Volume Analysis 92

    Marginal Analysis 93

    Future Earnings per Share 95

    Conclusion 99

    Chapter 5 Appendixes 99

     

    Chapter 6. Leverage 111

    Return on Investment Leverage 111

    Operating Leverage 116

    Financial Leverage 118

    Weaknesses of Profit Planning 121

    Conclusion 121

    Chapter 6 Appendixes 122

     

    Chapter 7. Financial Analysis 129

    Ratio Analysis 129

    Liquidity Ratios 132

    Profitability Ratios 136

    Other Ratios 138

    Determining Financial Norms 142

    Conclusion 142

    Chapter 7 Appendixes 143

     

    Part 4. Relationship of Risk and Return 149

     

    Chapter 8. Time Value of Money 151

    Short-Term Financing 151

    Intermediate-Term Financing 155

    The Amortization Schedule 157

    Conclusion 161

    Chapter 8 Appendixes 162

     

    Chapter 9. Risk and Required Return 171

    Nature of Risk 171

    Capital Asset Theory 178

    Risk and Required Return 181

    Financial and Operational Risks 183

    Conclusion 186

    Chapter 9 Appendixes 186

     

    Part 5. Nature of a Capital Investment Decision 193

     

    Chapter 10. Capital Budgeting Cash Flows 195

    Foundation of Capital Budgeting 196

    Cash Flows 201

    Conclusion 207

    Chapter 10 Appendix 208

     

    Chapter 11. Capital Budgeting Returns 211

    Payback Method 211

    Present Value Techniques 212

    Internal Rate of Return Method 213

    Net Present Value (NPV) Method 215

    Midyear Discount Factors for Cash Flows 217

    Conclusion 221

    Chapter 11 Appendixes 221

     

    Part 6. Factors That Affect the Value of a Firm 233

     

    Chapter 12. Valuation of Common Stock 235

    Common Stock and Equity Markets 235

    Valuation Concepts 237

    Value of Common Stock 240

    Comparative Approaches to Valuation 244

    Conclusion 245

    Chapter 12 Appendixes 245

     

    Chapter 13. Capital Structure of the Firm 253

    Capital Structure 253

    Weighted Average Cost of Capital (WACC) 254

    Required Return at the Margin 257

    Contribution of Miller and Modigliani 260

    Optimal Capital Structure 263

    Conclusion 266

    Chapter 13 Appendixes 266

     

    Chapter 14. Valuation of Business Combinations 271

    Business Combinations 271

    Pyramiding 273

    Takeover Strategies 276

    Conclusion 280

    Chapter 14 Appendixes 280

     

    Index 293

  • John J. Hampton (Litchfield, CT) is the KPMG Professor of Business and Director of Graduate Business Programs at St. Peter's College, and former Executive Director of the Risk and Insurance Management Society (RIMS). He is the author of Fundamentals of Enterprise Risk Management (978-0-8144-1492-7).

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