Financial Management for Decision Makers

Citation

Atrill, P. (2019). Financial Management for Decision Makers (9th ed.). Pearson.

Chapter Summary

The ninth edition has thirteen chapters (about 736 pages), five appendices (a present value table, an annual equivalent factor table, and solutions to self-assessment questions, review questions and selected exercises) and a glossary. The publisher presents it as a book on the practical application of financial management and its role in decision making, covering financial planning, capital investment decisions and the financing of a business. The chapters run in a simple sequence: the setting and tools (Chapters 1–3), investment (Chapters 4–5), financing and payouts (Chapters 6–9), then working capital, value, mergers and the international dimension (Chapters 10–13).

Chapter 1: The World of Financial Management

Sets out what financial management is and the role it plays inside a business. The ninth edition also gives greater coverage of behavioural finance.

Chapter 2: Financial Planning

Covers how a business plans its finances for the future.

Chapter 3: Analysing and Interpreting Financial Statements

Presents the analysis and interpretation of financial statements as a way to assess a business's position and performance.

Chapters 4–5: Making Capital Investment Decisions; Making Capital Investment Decisions: Further Issues

Chapter 4 introduces appraisal of long-term investments, with discounted cash flow methods such as net present value and internal rate of return (the present value table is in the appendices). Chapter 5 extends the treatment to further issues that arise when applying these techniques in practice, such as the effect of risk and inflation on appraisals.

Chapters 6–7: Financing a Business 1: Sources of Finance; Financing a Business 2: Raising Long-Term Finance

Chapter 6 surveys the sources of finance available to a business, internal and external. Chapter 7 concentrates on how long-term finance is raised. Financing a small business is one of the topics the publisher highlights.

Chapter 8: The Cost of Capital and the Capital Structure Decision

Links the cost of different sources of finance to the mix of debt and equity a business chooses, and to the rate used in investment appraisal.

Chapter 9: Making Distributions to Shareholders

Deals with dividend decisions and other distributions to shareholders.

Chapter 10: Managing Working Capital

Covers the management of the short-term assets and liabilities of a business, such as inventories, receivables, payables and cash.

Chapter 11: Measuring and Managing for Shareholder Value

Considers how a business can measure and manage performance with reference to the value created for its shareholders.

Chapter 12: Business Mergers and Share Valuation

Addresses mergers and takeovers and the methods used to value shares. The ninth edition updates the explanations, with more on share valuation methods.

Chapter 13: International Aspects of Financial Management

New in the ninth edition. It examines the benefits and problems of internationalisation and how to manage foreign exchange risk.

Key Concepts

Chapters 1–3: Setting and analysis

• Financial planning: preparing for future financial needs.
• Financial statement analysis: assessing a business's performance and position.
• Behavioural finance: how investor behaviour departs from the standard assumptions (new emphasis in this edition).

Chapters 4–9: Investment and financing

• Investment appraisal: discounted cash flow techniques such as net present value and internal rate of return.
• Sources of finance and raising long-term finance.
• Cost of capital and capital structure.
• Distributions to shareholders.

Chapters 10–13: Working capital, value and international finance

• Working capital management.
• Shareholder value.
• Share valuation and mergers.
• Foreign exchange risk.

Critical Analysis

Strengths

• A decision-making focus. The publisher describes the book as a unique focus on the practical application of financial management and its role in decision making, and the reviewer quoted by Pearson (Dr Kalsoom Jaffar, Aston University) says it integrates financial management with business policy and the management function, and helps students understand why theory and practice sometimes differ.
• Built-in practice. Activities are placed in the main text, with real-world examples and, in the ninth edition, an increased number of activities; the appendices give solutions to self-assessment questions, review questions and selected exercises.
• Clear intended readership. It is aimed at undergraduates from non-accounting or non-finance disciplines taking an introductory module, with a role as a foundation text for finance and accounting students.
• Recent additions. The ninth edition adds the international chapter, more behavioural finance, updated real-world examples and more on share valuation.

Limitations

• Introductory scope. The book is designed as an introduction for non-specialists; readers who want the theory of valuation, risk and capital structure at graduate depth will need a more theoretical text.
• Large book. At more than 700 pages, a short course will need to select chapters.
• UK-style programmes. The publisher positions the book for undergraduate modules and for certificate, diploma, Diploma in Management Studies and MBA programmes, so its framing follows that kind of course.

Where It Fits in the Course

Within the corporate finance course, this is the practical, manager-oriented entry. Ross, Westerfield and Jordan's Fundamentals of Corporate Finance and OpenStax's Principles of Finance are the other introductions; Atrill is aimed explicitly at students outside finance and accounting. Berk and DeMarzo's Corporate Finance builds the subject on the law of one price, and Brealey, Myers, Allen and Edmans's Principles of Corporate Finance is a comprehensive treatment of why firms and markets behave as they do.

A sensible sequence is Atrill first for vocabulary, planning, appraisal and financing, then Berk and DeMarzo or Brealey and Myers for more depth. For the accounting side of decisions, Atrill and McLaney's Management Accounting for Decision Makers is its companion.

How to Use This Book

Use it as a first course in financial management for non-finance students, for certificate, diploma and MBA students needing a working grounding, and as a foundation before further study.

• Core: Chapters 1–5 (planning, analysis, investment appraisal) and 6–8 (financing and cost of capital).
• Selective: Chapters 9–12 according to the course; Chapter 10 concerns day-to-day financial management.
• International: Chapter 13 for exchange risk in multinational settings.
• Practice: do the activities in the text, then the self-assessment and review questions, and check against the appendix solutions; the publisher also lists a companion website and instructor resources.