I'm using a MacBook Pro and TeXShop. I am writing a philosophy thesis and fairly new to LaTeX.
In my preamble I have put
\documentclass[a4paper,12pt]{article}
\linespread{1.5}
\usepackage[francais,english]{babel}
\usepackage[utf8]{inputenc}
\usepackage[T1]{fontenc}
\usepackage[round]{natbib}
\usepackage{epigraph}
\usepackage{makeidx}
\usepackage{url}
\usepackage{color}
\usepackage[colorlinks=true, pdfstartview=FitV, linkcolor=blue, citecolor=blue, urlcolor=blue]{hyperref}
\usepackage[nottoc]{tocbibind}
\setcounter{tocdepth}{12}
\usepackage{eurosym}
\usepackage{ragged2e}
\begin{document}
These earlier firms, were far more powerful; they commanded armies and fleets
\bibliographystyle{plainnat}
\bibliography{biblio.bib}
\printindex
\end{document}
However, in the pdf I get: "These earlier rms, were far more powerful; they commanded armies and eets"
Also, I want to use french characters (i.e. é è ç ô ê, etc), but I still have to type `e and so on.
I have googled, and played a bit with [latin1] but don't find an answer; please help.

applemaca go, that is usually the default inTeXShop, though I'd recommend reconfiguring it to use 'utf8`, might be better when exchanging documents with others. – daleif May 7 '12 at 13:59