This book describes the theory and practice of corporate finance. We hardly need to explain why financial managers should master the practical aspects of their job, but we should spell out why down-to-earth, redblooded managers need to bother with theory. Managers learn from experience how to cope with routine problems. But the best managers are also able to respond to change. To do this you need more than time-honored rules of thumb; you must understand why companies and financial markets behave the way they do. In other words, you need a theory of finance. Does that sound intimidating? It shouldn’t | Brealey-Meyers Front Matter Preface The McGraw-Hill Principles of Corporate Finance Seventh Edition Companies 2003 PREFACE This book describes the theory and practice of corporate finance. We hardly need to explain why financial managers should master the practical aspects of their job but we should spell out why down-to-earth red-blooded managers need to bother with theory. Managers learn from experience how to cope with routine problems. But the best managers are also able to respond to change. To do this you need more than time-honored rules of thumb you must understand why companies and financial markets behave the way they do. In other words you need a theory of finance. Does that sound intimidating It shouldn t. Good theory helps you grasp what is going on in the world around you. It helps you to ask the right questions when times change and new problems must be analyzed. It also tells you what things you do not need to worry about. Throughout this book we show how managers use financial theory to solve practical problems. Of course the theory presented in this book is not perfect and complete no theory is. There are some famous controversies in which financial economists cannot agree on what firms ought to do. We have not glossed over these controversies. We set out the main arguments for each side and tell you where we stand. Once understood good theory is common sense. Therefore we have tried to present it at a commonsense level and we have avoided proofs and heavy mathematics. There are no ironclad prerequisites for reading this book except algebra and the English language. An elementary knowledge of accounting statistics and microeconomics is helpful however. CHANGES IN THE SEVENTH EDITION This book is written for students of financial management. For many readers it is their first look at the world of finance. Therefore in each edition we strive to make the book simpler clearer and more fun to read. But the book is also used as a reference and guide by
