The current edition has been restructured and updated to emphasize the logical, integrated flow of the materials beginning with an overview of the “business system” and key financial analysis concepts, all the way to the development of business valuation and the meaning of shareholder value. This revised sequence of the materials was tested in numerous executive development courses over the past several years. The first five chapters form an integrated set, based on the initial conceptual overview of the business system, its decisional context, and its relationship to financial statements and analytical tools in Chapter 1. The specific coverage of analytical methods begins with funds flow analysis, moves on to financial performance analysis, and financial projections, and culminates in a discussion of the financial dynamics useful in modeling financial conditions. The last four chapters deal with more specialized topics such as investment analysis, the cost of capital, financing choices, and business valuation. The final chapter on valuation was updated and expanded to take into account current trends in mergers and acquisitions. The three appendixes were also updated, and for the first time the solutions to all problems were included in Appendix III, making the book truly self-contained.