The emphasis in economics throughout the world today is upon savings for investment. This is particularly evident in Australia where the government has encouraged people to place funds in superannuation. Graduates will be the future advisors as to how these funds are managed right across the business environment. It will be imperative that they have the capacity to be adaptive and to expand their financial knowledge. In addition, the education obtained must facilitate any change in career. The basic principles taught must have wide application for all sectors, private and public. The challenge facing finance academics is to keep materials up to date, and distinguish the permanent changes from transitional fads. It is with this in mind that we approached the new edition of our textbook, Fundamentals of Corporate Finance. We provide a framework for understanding that allows readers to embrace the innovations borne of changing environments and financial markets.

The Underlying Philosophy

Our experience of existing finance texts is that they present corporate finance as a collection of unrelated topics which are unified by virtue of being bound together between the covers of one book. In many cases, this perception is only natural because the subject is treated in a way that is both topic-oriented and procedural. How often have finance academics heard students complain that they could solve a specific problem if they knew which formula to apply? To overcome this problem, our overriding concern in the text is to develop the basic logic of financial decision making.

Intended Audience

This text is explicitly for a first course in business or corporate finance. The typical student will not have previously taken a course in finance, and no previous knowledge of finance is assumed. Since this course is frequently part of a common business core, the text is intended for majors and non-majors alike. In terms of background or prerequisites, the book is nearly self-contained. Some familiarity with basic accounting principles is assumed, but even these are reviewed very early on. The only other tool the student needs is basic algebra. As a result, students with diverse backgrounds will find the text very accessible.

We have taken a very close look at what is likely to be relevant in the 21st century, and we have taken a fresh, modern approach to many traditional subjects. In doing so, we eliminated topics of dubious relevance, down-played purely theoretical issues, and minimised the use of extensive and elaborate computations to illustrate points that are either intuitively obvious or of limited practical use.

Unlike virtually any other introductory text, Fundamentals of Corporate Finance 4e provides extensive real-world practical advice and guidance. We try to go beyond just presenting dry, standard textbook material to show how to actually use the tools discussed in the text. When necessary, the approximate, pragmatic nature of some types of financial analysis is made explicit, possible pitfalls are described, and limitations are outlined.

Mark Christensen
Spencer Thompson