Corporate Finance

Pierre Vernimmen (deceased) was a founding member and the first Coordinator of the Finance Department at HEC Paris. From 1973 to his death in 1996, he worked at Paribas as a private equity investor and, subsequently, led its mergers and acquisition teams.Pascal Quiry holds the BNP Paribas Chair in Finance at HEC Paris. After 23 years as an M&A banker, he founded an investment fund that invests in startups and unlisted SMEs. He is also an active investor in several listed companies. Yann Le Fur is a former Affiliated Professor at HEC Paris and is the head of the corporate finance group for Natixis in New York. He is also an active investor in several unlisted companies.

• Preface viiiFrequently used symbols xii1 Towards A Green, Responsible and Sustainable Corporate Finance 1Section I Financial Analysis 17Part One Fundamental Concepts In Financial Analysis 192 Cash Flow 213 Earnings 314 Capital Employed and Invested Capital 465 Walking Through From Earnings To Cash Flow 586 Getting To Grips With Consolidated Accounts 727 How To Cope With The Most Complex Points In Financial Accounts 90Part Two Financial Analysis and Forecasting 1178 How To Perform A Financial Analysis 1199 Margin Analysis: Structure 14410 Margin Analysis: Risks 16711 Working Capital and Capital Expenditures 18212 Financing 20313 Return On Capital Employed and Return On Equity 21914 Conclusion of Financial Analysis 238Section II Investors and Markets 245Part One Investment Decision Rules 24715 The Financial Markets 24916 The Time Value of Money and Net Present Value 27017 The Internal Rate of Return 286Part Two The Risk of Securities and The Required Rate of Return 29918 Risk and Return 30119 The Required Rate of Return 329Part Three Financial Securities 34720 Bonds 34921 Other Debt Products 37022 Shares 38623 Options 40624 Hybrid Securities 42725 Selling Securities 445Section III Value 46926 Value and Corporate Finance 47127 Measuring Value Creation 49128 Investment Criteria 50929 The Cost of Capital 52530 Risk and Investment Analysis 54231 Valuation Techniques 557Section IV Corporate Financial Policies 589Part One Capital Structure Policies 59132 Capital Structure and The Theory of Perfect Capital Markets 59333 Capital Structure, Taxes and Organisation Theories 60534 Debt, Equity and Options Theory 62135 Working Out Details: The Design of The Capital Structure 639Part Two Equity Capital 65936 Returning Cash To Shareholders 66137 Distribution In Practice: Dividends and Share Buy-Backs 67838 Share Issues 696Part Three Debt Capital 70939 Implementing A Debt Policy 711Section V Financial Management 729Part One Corporate Governance and Financial Engineering 73140 Setting Up A Company and Financing Start-Ups 73341 Shareholders 75442 Choosing A Corporate Structure 77943 Corporate Governance 79544 Initial Public Offerings (IPOS) 80745 Taking Control of A Company 81946 Mergers and Demergers 84247 Leveraged Buyouts (LBOS) 86048 Bankruptcy and Restructuring 876Part Two Managing Working Capital, Cash Flows, Financial Risks and Real Estate 88949 Managing Working Capital 89150 Cash Management 90351 Managing Financial Risks 92252 Managing Operational Real Estate 946Epilogue – Finance and Strategy 958Top 20 Largest Listed Companies 965Contents 973Index 983