Preface

When Fundamentals was first published nearly 25 years ago, our intent was to write an introductory finance text that students could truly understand. Today, a generation later, Fundamentals has become the leading undergraduate finance text. Our goal with this ninth edition has been to produce a book and ancillary package that not only holds its lead but sets a new standard for finance textbooks. By incorporating the latest developments in the fields of finance, education, and publishing into Fundamentals and its related ancillaries, we have made the ninth edition the most complete and integrated learning package available. And, of course, its clarity, accuracy, and student accessibility remain as strong as ever.

Finance is an exciting, challenging, and ever-changing discipline. Changing technology and increased globalization are dramatically transforming financial practices and markets. In this ninth edition we strive to communicate the excitement, and to demonstrate how these changes are affecting finance and other aspects of business.

Changing technology has affected not only what we teach but also how we teach. More and more, we find ourselves using computer spreadsheets and the Internet to supplement our classroom lectures. With this in mind, we developed a set of integrated spreadsheets and Internet exercises and placed them (as appropriate) throughout the book and ancillaries. These items, which are available both on a CD-ROM and via the Internet, will make it easier for instructors to teach and for students to learn the fundamentals of financial management.

In developing and improving Fundamentals, we tried to convey the excitement and ever-changing nature of finance and to make students realize its importance and relevance. More often than not, students discover that finance is more interesting and relevant than they had anticipated. Nevertheless, finance remains a challenging subject for many students, and we kept this in mind as we developed the text and its supporting materials. Without sacrificing rigor, we tried to explain each topic as clearly and completely as possible.

Of course, an introductory finance course should be more than just a series of topics-students must understand not only the basic concepts but also how they fit together. With this in mind, Fundamentals begins with a discussion of financial objectives, where we show how managers and investors use financial statements to determine how well firms are meeting those objectives. We also discuss how incentive compensation, along with the threat of takeovers, motivates managers to improve performance and how that benefits both stockholders and society at large. We also describe early on the financial environment, financial forecasting, the fundamental trade-off between risk and return, and the time value of money. Then we build on these basic concepts to explain how stock and bond prices are determined.

Building on this background, subsequent chapters explain the financial tools and techniques that are used to help firms maximize value by improving decisions. Included here are capital budgeting techniques, procedures for determining the capital structure, and various aspects of working capital management. The final section of the book consists of four chapters that deal with derivatives and risk management, multinational financial management, hybrid financing, and mergers.

Our organization has four important advantages:

1. Explaining early on how accounting data are used, how pro forma financial statements are projected, how financial markets operate, and how security prices are determined helps students understand how financial management affects stock prices. Also, the early coverage of risk analysis, time value of money, and valuation techniques permits us to use and reinforce those concepts throughout the remainder of the book.
2. Structuring the book around markets and valuation enhances continuity and helps students see how the various topics are related to one another.
3. Most students-even those who do not plan to major in finance-are interested in stock and bond values, rates of return, and the like. Because one's ability to learn a topic is a function of his or her interest and motivation, and because Fundamentals covers securities and security markets early, our organization is pedagogically sound.
4. Once the basic concepts have been established, it is easier for students to understand how and why corporations make specific investment and financing decisions and how they develop and execute their working capital policies.

RELATIONSHIP TO OTHER DRYDEN BOOKS

The growing body of financial knowledge makes it difficult, if not impossible, to include all that one might desire in one textbook. This led Gene Brigham to coauthor two other texts that deal with materials that go beyond what can be covered in an introductory course. The first of these books is a comprehensive book aimed primarily at MBAs (Financial Management: Theory and Practice, ninth edition, coauthored with Louis C. Gapenski and Michael C. Ehrhardt). The second is an upper-level undergraduate text (Intermediate Financial Management, sixth edition, coauthored with Louis C. Gapenski and Phillip R. Daves).

Also, some time ago a survey of professors indicated that some preferred a smaller, more streamlined textbook than Fundamentals. With that in mind, we created yet another text, Fundamentals of Financial Management: Concise Second Edition. The development of Concise forced us to rethink the book with the goal of pruning less essential and/or redundant materials. This led to improvements that we carried over to Fundamentals to make the ninth edition an even better book.

Although Concise has been well received, there are two significant advantages to a more complete book such as Fundamentals:

1. Fundamentals provides professors with more flexibility in designing their courses.
2. Fundamentals is a more complete reference book for students after they complete the course. This is especially important for nonfinance majors, who will not otherwise have access to the materials contained in Fundamentals but omitted from Concise. In this regard, it should be noted that Fundamentals' chapters are written in a modular, self-contained format, specifically designed to make it easy for students to read them on their own.

INTENDED MARKET

Fundamentals is intended for use in an introductory finance course. The key chapters can be covered in a one-term course, but supplemented with cases and some outside readings, the book can be used for a two-term course. When it is used in a one-term course, instructors generally cover only selected chapters, leaving the others for students to examine on their own or for use as reference in later courses and after graduation. Note also that we made every effort to write all the chapters in a flexible, modular format, which will help instructors cover the material in whatever sequence they choose.

The ninth edition continues to offer the most complete and integrated teaching system available.

Four important advantages of the ninth edition's organization.

All chapters are written in a flexible, modular format.

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