The desire to write Principles of Managerial Finance came from the experience of teaching the introductory managerial finance course. Those who have taught the introductory course many times can appreciate the difficulties that some students have absorbing and applying financial concepts. Students want a book that speaks to them in plain English and a book that ties concepts to reality. These students want more than just description—they also want demonstration of concepts, tools, and techniques. This book is written with the needs of students in mind, and it effectively delivers the resources that students need to succeed in the introductory finance course.
Courses and students have changed since the first edition of this book, but the goals of the text have not changed. The conversational tone and wide use of examples set off in the text still characterize Principles of Managerial Finance. Building on those strengths, 13 editions, numerous translations, and well over half a million U.S. users, Principles has evolved based on feedback from both instructors and students, from adopters, nonadopters, and practitioners.
In this edition, Chad Zutter of the University of Pittsburgh joins the author team. A recent recipient of the Jensen Prize for the best paper published in the Journal of Financial Economics, Chad brings a fresh perspective to Principles. Larry and Chad have worked together to incorporate contemporary thinking and pedagogy with the classic topics that Gitman users have come to expect.
NEW TO THE THIRTEENTH EDITION
As we made plans to publish the thirteenth edition, we carefully assessed market feedback about content changes that would better meet the needs of instructors teaching the course.
The chapter sequence is similar to the prior edition, but there are some noteworthy changes. The thirteenth edition contains 19 chapters divided into eight parts. Each part is introduced by a brief overview, which is intended to give students an advance sense for the collective value of the chapters included in the part.
In Part 1, a new Chapter 2 expands coverage of financial markets and institutions, with particular emphasis on the recent financial crisis and recession. This chapter not only explores the root causes and consequences of the financial crisis, but it also discusses the changing regulatory landscape within which financial institutions and markets function.
Part 2 contains three chapters in the same order in which they appeared in the twelfth edition. These chapters focus on basic financial skills such as financial statement analysis, cash flow analysis, and time-value-of-money calculations.
Part 3 focuses on bond and stock valuation. We moved these two chapters forward in this edition, just ahead of the risk and return chapter, to provide students with exposure to basic material on bonds and stocks that is easier to grasp than some of the more theoretical concepts in the next part.
Part 4 contains the risk and return chapter as well as the chapter on the cost of capital, which we have moved forward to lead into Part 5 on capital budgeting. We also moved up the chapter on the cost of capital so that it follows directly on the heels of the risk and return material. We believe that this makes the subsequent discussion of capital budgeting topics more meaningful because students will already have an idea of where a project “hurdle rate” comes from.
Part 5 contains three chapters on various capital budgeting topics. A change from the last edition here is that we present capital budgeting methods before the chapter on capital budgeting cash flows.
Parts 6, 7, and 8 contain the same seven chapters in the same order that appeared in the latter part of the twelfth edition. These chapters cover topics such as capital structure, payout policy, working capital management, derivatives, mergers, and international finance. Details about the revisions made to these chapters appear below.
Although the text content is sequential, instructors can assign almost any chapter as a self-contained unit, enabling instructors to customize the text to various teaching strategies and course lengths.
A number of new topics have been added at appropriate places, and new features appear in each chapter. The Matter of Fact feature provides additional detail and interesting empirical facts that help students understand the practical implications of financial concepts. For students who want to explore particular topics more deeply on their own, the In More Depth feature, available on MyFinanceLab, offers a guide for further study. In addition, as the detailed list shows, the chapteropening vignettes and In Practice boxes have been replaced or heavily revised: For example, three-quarters of the chapter-opening vignettes are new, focusing on companies such as Facebook, Abercrombie & Fitch, and Best Buy that have student appeal, and more than half of the Focus on Ethics boxes are new. Also new to this edition are Opener in-Review questions, which appear at the end of each chapter.