Financial Strategies for the Manager
Part of Tsinghua University Texts, Financial Strategies for the Manager includes a range of financial management issues such as financial statement analysis, a systematic approach to financial performance appraisal, liquidity management and sales growth,
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Financial Strategies for the Manager
Charles Priester Jincheng Wang
Financial Strategies for the Manager With 35 figures
Editors Charles Priester 4741, Lisandra Road Victoria, BC Canada Email: [email protected]
Jincheng Wang Management School Tianjin University of Foreign Studies Tianjin, China Email: [email protected]
ISBN 978-7-302-19092-9 Tsinghua University Press, Beijing ISBN 978-3-540-70963-3 e-ISBN 978-3-540-70966-4 Springer Heidelberg Dordrecht London New York Library of Congress Control Number: 2008932463 ¤ Tsinghua University Press, Beijing and Springer-Verlag Berlin Heidelberg 2010 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer. Violations are liable to prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: Frido Steinen-Broo, EStudio Calamar, Spain Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)
Foreword
This book was written well before the worldwide financial crisis of 2008 that plunged the world into a major economic recession. Yet the key messages, conclusions, suggestions and recommendations that are embodied in this book remain valid today. The fundamental and essential contributing factor that led to this crisis was the excessive reliance on debt financing on the part of individuals, banks and certain governments. There was a widely held belief that economic growth would continue in most countries and thereby support the strongly rising values of real estate, energy and most industrial resources. Banks and home owners felt confident that property values would continue to rise, so little thought was given to the possibility of default of property loans. Unfortunately the boom in property, energy and industrial materials prices came to an end and their prices plunged rapidly which in turn led to the worldwide financial crisis with which we are all so familiar. A major consequence of the financial crisis was that individuals and some banks were forced into a wrenching “financial de-levering” process in which their reliance on borrowed money was reduced significantly. This produced painful consequences, as their balance sheets shrank like snow in the sun, often resulting in bankruptcy. A by-product of the financial crisis is the serious erosion of trust between debtors and creditors. Trust is a necessary and cru
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