In 2005 all publicly-listed European firms will be obliged to present their financial results using the 'fair value method'. Traditional accounting practices will be replaced by a new methodology in which market values play a prominent role. It is expected that the importance of market values will continue to increase even further in the more distant future.Firms, investors, analysts and other interested parties think much more in terms of (expected) cash flows and risks now. This shift in orientation will result in a situation in which financial markets (and the way in which market participants reach their decisions) will become more important for business enterprises and non-profit organizations alike. Management needs to ensure good contact with financial market participants (Investor Relations). As a result of this the dissemination of (financial) information by the entity needs to be such that market participants will have the feeling that they are 'well-informed'. Another aspect of this growing interrelationship between business and non-profit entities and financial markets is the increased importance of corporate governance.In this book we will analyze capital structure and the relationship with financial markets from the perspective of the cash-flow-based approach. According to this approach financial securities, and the organizations issuing them, will be valued on the basis of the net present value of their expected future cash flows.This book is written for students of financial management at the graduate and undergraduate level. It is also useful for practitioners that need to take solid financial decisions in a profit- or non-profit environment.Professor André B. Dorsman, Ph.D., is professor of finance at Nyenrode University. He is also a member of the Economic Faculty at Free University Amsterdam.