Michael Taillard - Corporate Finance For Dummies

Part 3 , Valuations on the Price Tags of Business: Before you buy or invest in something, how do you figure out what it’s worth? You start by reading the chapters in this part!

Part 4 , A Wonderland of Risk Management: The chapters in this part deal heavily in risk and cover some of the more cutting-edge topics in corporate finance.

Part 5 , Financial Management: Find out about evaluating corporate financial performance, forecasting future financial performance, and assessing the performance of other corporations for potential mergers and acquisition (M&A).

Part 6 , The Part of Tens: Each chapter in this part includes ten things you really should know, whether you intend to pursue corporate finance or not.

While writing this book, I’ve done my best to assume that you, the reader, know absolutely nothing. That being said, no one is perfect. I strive to point out the details, and when stuff gets too complicated, I just summarize the topic. I also explain — or at least clarify — everything, in normal everyday language, without trying to sound very technical. This book is all about making the subject of corporate finance accessible to everyone, while also trying to keep it from being too dry. Corporate finance books can be boring, which is sad because they don’t need to be. This book is a bit heavy on the math. Yes, I know, math is hard. I never liked it, either. That’s why the majority of the math is supplemented with explanations of how to do the calculations that’s simple enough to spare you from needing to know how to actually read math.

You can also supplement the information in this book by checking out Accounting For Dummies by John A. Tracy (Wiley). It can help give you more detail about these topics. I really tried to only include those details relevant to the subject of corporate finance.

Other than that, if you’re reading this right now, then you’re prepared to begin reading Corporate Finance For Dummies!

You’ll see a few icons scattered around the book. These icons highlight bits of information that are of particular importance to you. Here’s what to look for:

Professionals get good at what they do by making stupid mistakes and learning from them. Now you can learn from these stupid mistakes without the unfortunate side effects usually associated with making them yourself. Just look for the Tip icon.

Whenever you see this icon, it means that you may one day need to remember the information included. You may want to consider keeping it in mind.

When you see this icon, it means that I’m talking about something that may pose a serious threat. I’m not being facetious this time, either. Corporate finance is a study in money, and this is an intro book, so in some instances, you really should just go talk to a professional before you get yourself or others into financial or legal trouble.

When you see this icon, it means that the information that follows is a deeper dive into a more advanced topic that is helpful to know, but not necessary.

First, and arguably more importantly, the writing in this edition has been cleaned up quite a lot and just generally improved over the previous edition. As for content, there are new sections added to this book, such as addressing cryptocurrency and quantitative finance. Information and examples have been updated, while some outdated content was removed.

In addition to the abundance of information and guidance related to corporate finance that I provide in this book, you get access to even more help and information online at Dummies.com . Check out this book's online Cheat Sheet. Just go to www.dummies.com and search for “Corporate Finance For Dummies Cheat Sheet.”

This book isn’t linear. I didn’t write the chapters in order, and you don’t have to read them in order. However, you may want to begin with the chapters that are included in Parts 2and 3before attempting the chapters in Parts 4and 5. At least flip through the earlier pages to make sure that you’re familiar with how to read financial statements and the time value of money before you attempt to move on to Parts 4and 5. As long as you’re familiar with both those things, nothing in this book will be out of your reach.

Part 1

IN THIS PART …

Consider the role that corporate finance plays in your life and make it work for you.

Learn about who’s who in the world of finance and how to find a job.

Get comfortable raising capital, writing grants, and schmoozing investors.

Chapter 1

IN THIS CHAPTER

Understanding the meaning of money

Looking at the study of corporate finance

Seeing the role corporate finance plays in your life

Making corporate finance work for you

Corporate finance is more than just a measure of money. As you see in this chapter, money is incidental to finance. When discussing corporate finance, we are actually looking at the entire world in a new way — a way that measures the entire universe and the things within it in a way that makes it useful to us. We can calculate things in terms of corporate finance that simply can’t be accurately measured in any other way. Throughout this chapter we talk about the nature of money and how it applies to corporate finance.

Corporate finance is the study of relationships between groups of people that quantifies the otherwise immeasurable. To understand how this definition makes any sense at all, first you have to take a quick look at the role of money in the world.

According to Adam Smith, an 18th century economist, the use of money was preceded by a barter system. In a barter system, people exchange goods and services of relatively equivalent value without using money. Perhaps if you worked growing hemp and making rope out of it, you could give that rope to people in exchange for food, clothes, or whatever else you needed that the people around you might be offering. What happens, though, when someone wants rope, but that person has nothing you want? What about those times when you need food, but no one needs rope? Because of these times, people started to use a rudimentary form of money. So, say that you sell your rope to someone, but they have nothing you want. Instead, they give you a credit for their services that you are free to give to anyone else. You decide to go and buy a bunch of beer, giving the brewer the note of credit, ensuring that the person who bought your rope will provide the brewer a service in exchange for giving you beer. Thus, the invention of money was born, though in a very primitive form.