When the three of us decided to write a book, we were united by one
strongly held principle: Corporate finance should be developed in terms
of a few integrated, powerful ideas. We felt that the subject was all too
often presented as a collection of loosely related topics, unified primarily
by virtue of being bound together in one book, and we thought there must
be a better way.
One thing we knew for certain was that we didn't want to write a "me-too"
book. So, with a lot of help, we took a hard look at what was truly important
and useful. In doing so, we were led to eliminate topics of dubious relevance,
downplay purely theoretical issues, and minimize the use of extensive and
elaborate calculation to illustrate points that are either intuitively
obvious or of limited practical use.
As a result of this process, three basic themes became our central focus
in writing Fundamentals of Corporate Finance:
An Emphasis on Intuition We always try to separate and explain the principles
at work on a common sense, intuitive level before launching into any specifics.
The underlying ideas are discussed in very general terms and then by way
of examples that illustrate in more concrete terms how a financial manager
might proceed in a given situation.
A Unified Valuation Approach We treat net present value (NPV) as the
basic concept underlying corporate finance. Many texts stop well short
of consistently integrating this important principle. The most basic notion,
that NPV represents the excess of market value over cost, often is lost
in an overly mechanical approach that emphasizes computation at the expense
of comprehension. In contrast, every subject we cover is firmly rooted
in valuation, and care is taken throughout to explain how particular decisions
have valuation effects.
A Managerial Focus Students shouldn't lose sight of the fact that financial
management concerns management. We emphasize the role of the financial
manager as decision maker, and we stress the need for managerial input
and judgement. We consciously avoid the "black box" approaches
to finance, and, where appropriate, the pragmatic nature of financial analysis
is made explicit, possible pitfalls are described, and limitations are
discussed.
Stephen A. Ross
Randolph W. Westerfield
Bradford D. Jordan
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