Foundations of Finance: Logic and Practice of Financial Management and MyFinanceLab Student Access Code Package,9780131856059

Foundations of Finance: Logic and Practice of Financial Management and MyFinanceLab Student Access Code Package

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Edition: 5th
ISBN13: 9780131856059
ISBN10: 0131856057
Format: Package
Pub. Date: 2008-01-01
Publisher(s): Pearson College Div
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Summary

KEY BENEFIT: Keown allows readers to see the big picture by letting them understand the logic that drives finance rather than memorizing formulas. Very user friendly, the basic pedagogical approach to the presentation of new tools and techniques is "say it" then "illustrate it with an example" and reinforce with lots of "real world examples".As well as including strong international coverage some key topics are: Financial Markets and Interest Rates; Understanding Financial Statements and Cash Flows; Time Value of Money; Risk and Return; Bond and Stock Valuation; Capital-Budgeting Techniques and Practice; Cash Flows and Other Topics in Capital Budgeting; and Current Asset Management.For an enduring understanding of the basic tools and fundamental principles upon which finance is based.

Table of Contents

About the Authors vi
Preface xxi
PART: 1 THE SCOPE AND ENVIRONMENT OF FINANCIAL MANAGEMENT
2(132)
An Introduction to the Foundations of Financial Management---The Ties That Bind
5(26)
Goal of the Firm
6(1)
Legal Forms of Business Organization
7(3)
An Entrepreneur's Perspective: Limited Liability and the Entrepreneur
10(13)
Federal Income Taxation
11(5)
Ten Principles That Form the Foundations of Financial Management
16(1)
Principle 1: The Risk--Return Trade-Off---We Won't Take On Additional Risk Unless We Expect to Be Compensated with Additional Return
16(1)
Principle 2: The Time Value of Money---A Dollar Received Today Is Worth More Than a Dollar Received in the Future
17(1)
Principle 3: Cash---Not Profits---Is King
17(1)
Principle 4: Incremental Cash Flows---It's Only What Changes That Counts
17(1)
Principle 5: The Curse of Competitive Markets---Why It's Hard to Find Exceptionally Profitable Projects
18(1)
Principle 6: Efficient Capital Markets---The Markets Are Quick and the Prices Are Right
19(1)
Principle 7: The Agency Problem---Managers Won't Work for the Owners Unless It's in Their Best Interest
20(1)
Principle 8: Taxes Bias Business Decisions
20(1)
Principle 9: All Risk Is Not Equal---Some Risk Can Be Diversified Away, and Some Cannot
21(1)
Principle 10: Ethical Behavior Is Doing the Right Thing, and Ethical Dilemmas Are Everywhere in Finance
22(1)
Ethics in Financial Management: The Enron Lessons: Trust
23(1)
An Entrepreneur's Perspective: The Entrepreneur and Finance
24(7)
Finance and the Multinational Firm: The New Role
24(1)
Summary
25(1)
Key Terms
26(1)
Study Questions
26(1)
Self-Test Problem
27(1)
Study Problems
27(1)
Comprehensive Problem
28(1)
Self-Test Solution
29(2)
The Financial Markets and Interest Rates
31(42)
The Financial Manager, Internal and External Funds, and Flexibility
34(2)
The Mix of Corporate Securities Sold in the Capital Market
36(1)
Why Financial Markets Exist
37(2)
Financing of Business: The Movement of Funds Through the Economy
39(2)
Components of the U.S. Financial Market System
41(4)
The Investment Banker
45(3)
Across the Hall: Management and Selection Criteria for an Investment Banker
48(11)
Private Placements
48(2)
Flotation Costs
50(1)
Regulation
50(5)
Rates of Return in the Financial Markets
55(1)
Interest Rate Levels over Recent Periods
56(3)
Across the Hall: Economics---Commercial Banking and the Importance of Interest Rates
59(14)
Interest Rate Determinants in a Nutshell
60(3)
The Term Structure of Interest Rates
63(4)
Finance and the Multinational Firm: Efficient Financial Markets and Intercountry Risk
67(1)
Summary
67(2)
Key Terms
69(1)
Study Questions
69(1)
Study Problems
70(1)
Web Works
70(1)
Comprehensive Problems
71(2)
Understanding Financial Statements and Cash Flows
73(28)
Income Statement
74(2)
Financial Management in Practice: Starbucks Corporation: A Firm on the Go
76(2)
Balance Sheet
77(1)
Across the Hall: Want to Start a New Business? Better Know Your Numbers
78(3)
Financial Management in Practice: Being Profitable Is Vital: Just Ask Ford Motor Company
81(5)
Measuring Cash Flows
82(4)
Financial Management in Practice: Profits and Cash Matter: The FedEx Dilemma
86(1)
Financial Management in Practice: Measuring Free Cash Flows: The Tyco International Way
87(1)
Ethics in Financial Management: Financial Scandals: European Style
88(13)
Summary
89(1)
Key Terms
90(1)
Study Questions
91(1)
Self-Test Problem
91(1)
Study Problems
92(4)
Web Works
96(1)
Comprehensive Problem
97(2)
Self-Test Solution
99(2)
Evaluating a Firm's Financial Performance
101(33)
The Purpose of Financial Analysis
102(2)
Financial Management in Practice: Only with Financial Analysis Can We Know How We Are Doing
104(7)
Measuring Key Financial Relationships
105(6)
Financial Management in Practice: Keeping Your Eyes on the Numbers
111(2)
Financial Management in Practice: Managing by the Numbers
113(9)
Financial Management in Practice: Economic Value Added Used to Measure a Firm's Financial Performance
122(12)
Limitations of Financial Ratio Analysis
122(1)
Summary
123(1)
Key Terms
124(1)
Study Questions
125(1)
Self-Test Problems
125(1)
Study Problems
126(5)
Web Works
131(1)
Comprehensive Problem
131(1)
Self-Test Solutions
132(2)
PART: 2 VALUATION OF FINANCIAL ASSETS
134(122)
The Time Value of Money
137(36)
Compound Interest and Future Value
138(2)
Tables, Calculators, and Spreadsheets---Three Alternatives to Solving Time Value of Money Problems
140(5)
Present Value
145(4)
Annuities
149(5)
Annuities Due
154(4)
Compound Interest with Nonannual Periods
158(2)
Present Value of an Uneven Stream
160(1)
Perpetuities
161(1)
The Multinational Firm: The Time Value of Money
161(1)
Summary
162(1)
Key Terms
163(1)
Study Questions
163(1)
Self-Test Problems
163(1)
Study Problems
163(6)
Web Works
169(1)
Comprehensive Problem
170(1)
Self-Test Solutions
171(2)
The Meaning and Measurement of Risk and Return
173(32)
Expected Return Defined and Measured
174(1)
Risk Defined and Measured
175(3)
Financial Management in Practice: Want Big and Risky Returns: Think Small
178(7)
Rates of Return: The Investor's Experience
179(2)
Risk and Diversification
181(4)
Across the Hall: Bankers Have to Diversify Too
185(6)
Financial Management in Practice: Do Stocks Always Give Higher Returns Than Bonds?
191(3)
The Investor's Required Rate of Return
192(2)
Financial Management in Practice: Does Beta Always Work?
194(11)
Summary
195(1)
Key Terms
196(1)
Study Questions
196(1)
Self-Test Problems
197(1)
Study Problems
198(2)
Web Works
200(1)
Comprehensive Problem
200(2)
Self-Test Solutions
202(3)
Valuation and Characteristics of Bonds
205(26)
Types of Bonds
206(2)
Terminology and Characteristics of Bonds
208(3)
Financial Management in Practice: Co-Cos: A Good Deal for Whom?
211(3)
Definitions of Value
211(1)
Determinants of Value
212(2)
Financial Management in Practice: Ethics: Keeping Perspective
214(5)
Valuation: The Basic Process
214(1)
Bond Valuation
215(3)
Yield to Maturity
218(1)
Financial Management in Practice: AT&T Bond Prices Fall Thanks to WorldCom
219(12)
Bond Valuation: Three Important Relationships
220(4)
Summary
224(1)
Key Terms
225(1)
Study Questions
225(1)
Self-Test Problems
225(1)
Study Problems
225(2)
Web Works
227(1)
Comprehensive Problem
227(1)
Self-Test Solutions
228(3)
Valuation and Characteristics of Stock
231(25)
Preferred Stock
232(2)
Financial Management in Practice: Reading a Stock Quote in the Wall Street Journal
234(4)
Common Stock
236(2)
Financial Management in Practice: What Does a Stock Look Like?
238(1)
Financial Management in Practice: What Do You Tell Your Shareholders?
239(17)
The Stockholder's Expected Rate of Return
247(4)
Summary
251(1)
Key Terms
252(1)
Study Questions
252(1)
Self-Test Problems
252(1)
Study Problems
253(1)
Web Works
254(1)
Comprehensive Problem
255(1)
Self-Test Solutions
255(1)
PART 3: INVESTMENT IN LONG-TERM ASSETS
256(108)
Capital-Budgeting Techniques and Practice
259(36)
Finding Profitable Projects
260(1)
Capital-Budgeting Decision Criteria
261(2)
Financial Management in Practice: Finding Profitable Projects in Competitive Markets---Creating Them by Developing a Cost Advantage
263(3)
Across the Hall: Marketing
266(16)
Capital Rationing
276(2)
Problems in Project Ranking: Capital Rationing, Mutually Exclusive Projects, and Problems with the IRR
278(4)
Ethics in Financial Management: The Financial Downside to Poor Ethical Behavior
282(13)
Ethics in Capital Budgeting
282(1)
A Glance at Actual Capital-Budgeting Practices
283(1)
Finance and the Multinational Firm: Capital Budgeting
284(1)
Summary
284(2)
Key Terms
286(1)
Study Questions
286(1)
Self-Test Problem
287(1)
Study Problems
287(4)
Web Works
291(1)
Comprehensive Problem
291(2)
Self-Test Solution
293(2)
Cash Flows and Other Topics in Capital Budgeting
295(34)
Guidelines for Capital Budgeting
296(3)
Financial Management in Practice: Universal Studios
299(7)
An Overview of the Calculations of a Project's Free Cash Flows
299(7)
Across the Hall: ... Marketing
306(23)
Options in Capital Budgeting
308(2)
Risk and the Investment Decision
310(3)
Incorporating Risk into Capital Budgeting
313(3)
Examining a Project's Risk Through Simulation
316(3)
Finance and the Multinational Firm: Calculating Cash Flows and the International Dimension of Risk
319(1)
Summary
319(1)
Key Terms
320(1)
Study Questions
320(1)
Self-Test Problem
321(1)
Study Problems
321(4)
Web Work
325(1)
Comprehensive Problem
325(2)
Self-Test Solution
327(2)
Cost of Capital
329(35)
The Cost of Capital: Key Definitions and Concepts
330(1)
Determining Individual Costs of Capital
331(7)
Financial Management in Practice: IPOs: Should a Firm Go Public?
338(5)
The Weighted Average Cost of Capital
339(3)
Calculating Divisional Costs of Capital: PepsiCo, Inc.
342(1)
Financial Management in Practice: The Pillsbury Company Adopts EVA® with a Grassroots Education Program
343(5)
Using a Firm's Cost of Capital to Evaluate New Capital Investments
344(2)
Shareholder Value--Based Management
346(2)
Financial Management in Practice: New Users Explain Their Goals and Objectives in Adopting EVA
348(4)
Finance and the Multinational Firm: Why Do Interest Rates Differ Between Countries?
351(1)
Financial Management in Practice: Tying Incentive Compensation to Economic Value Added
352(12)
Summary
353(3)
Key Terms
356(1)
Study Questions
356(1)
Self-Test Problems
356(1)
Study Problems
357(4)
Web Works
361(1)
Comprehensive Problem
361(1)
Self-Test Solutions
362(2)
PART 4: CAPITAL STRUCTURE AND DIVIDEND POLICY
364(80)
Determining the Financing Mix
367(48)
Business and Financial Risk
369(1)
Break-Even Analysis
370(1)
Across the Hall: Accounting---Cost Structure, Forecasting, and Investment
371(6)
Financial Management in Practice: General Motors: Pricing Strategy in a Slow Aggregate Economy
377(8)
Operating Leverage
377(3)
Financial Leverage
380(3)
Combination of Operating and Financial Leverage
383(2)
Financial Management in Practice: Coca--Cola Financial Policies
385(1)
Planning the Financing Mix
385(1)
Financial Management in Practice: The Enron Lessons: Leverage
386(10)
A Quick Look at Capital Structure Theory
387(9)
Financial Management in Practice: Georgia-Pacific on Capital Structure
396(5)
Basic Tools of Capital Structure Management
396(5)
Financial Management in Practice: The Walt Disney Company on Capital Costs and Capital Structure
401(14)
A Glance at Actual Capital Structure Management
402(2)
Finance and the Multinational Firm: Business Risk and Global Sales
404(1)
Summary
404(2)
Key Terms
406(1)
Study Questions
406(1)
Self-Test Problem
407(1)
Study Problems
407(4)
Web Works
411(1)
Comprehensive Problems
412(1)
Self-Test Solution
413(2)
Dividend Policy and Internal Financing
415(29)
Key Terms
416(1)
Does Dividend Policy Affect Stock Price?
417(9)
The Dividend Decision in Practice
426(1)
Alternative Dividend Policies
427(3)
Dividend Payment Procedures
430(1)
Stock Dividends and Stock Splits
431(2)
Stock Repurchases
433(2)
Financial Management in Practice: ``Many Concerns Use Excess Cash to Repurchase Their Shares''
435(9)
Finance and the Multinational Firm: The Case of Low-Dividend Payments; So Where Do We Invest?
436(2)
Summary
438(1)
Key Terms
439(1)
Study Questions
439(1)
Self-Test Problems
440(1)
Study Problems
440(1)
Web Works
441(1)
Comprehensive Problem
442(1)
Self-Test Solutions
443(1)
PART 5: WORKING-CAPITAL MANAGEMENT AND INTERNATIONAL BUSINESS FINANCE
444(107)
Short-Term Financial Planning
447(22)
Financial Forecasting
448(5)
The Sustainable Rate of Growth
453(1)
Financial Management in Practice: Sustainable Growth---A Broader Perspective at DuPont
454(2)
Limitations of the Percent of Sales Forecast Method
454(2)
Financial Management in Practice: To Bribe or Not to Bribe
456(2)
Constructing and Using a Cash Budget
456(2)
Financial Management in Practice: Being Honest About the Uncertainty of the Future
458(11)
Summary
458(1)
Key Terms
459(1)
Study Questions
459(1)
Self-Test Problems
459(1)
Study Problems
460(5)
Web Works
465(1)
Comprehensive Problem
466(1)
Self-Test Solutions
467(2)
Working-Capital Management
469(22)
Managing Current Assets and Liabilities
470(1)
Appropriate Level of Working Capital
471(3)
Estimation of the Cost of Short-Term Credit
474(1)
Sources of Short-Term Credit
475(1)
Financial Management in Practice: Managing Working Capital by Trimming Receivables
476(15)
Multinational Working-Capital Management
483(1)
Summary
484(1)
Key Terms
485(1)
Study Questions
485(1)
Self-Test Problems
486(1)
Study Problems
486(2)
Web Works
488(1)
Self-Test Solutions
489(2)
Current Asset Management
491(36)
Why a Company Holds Cash
492(2)
Cash Management Objectives and Decisions
494(1)
Collection and Disbursement Procedures
495(6)
Evaluation of Costs of Cash Management Services
501(1)
Composition of Marketable-Securities Portfolio
502(6)
Accounts-Receivable Management
508(3)
Inventory Management
511(6)
Summary
517(1)
Key Terms
518(1)
Study Questions
518(1)
Self-Test Problems
518(1)
Study Problems
519(4)
Web Works
523(1)
Comprehensive Problem
523(1)
Self-Test Solutions
524(3)
International Business Finance
527(24)
The Globalization of Product and Financial Markets
528(1)
Exchange Rates
528(8)
Across the Hall: Marketing
536(1)
Interest-Rate Parity Theory
536(1)
Financial Management in Practice: ``The Euro Has Yet to Spark Hoped-For Financial Revolution''
537(14)
Purchasing-Power Parity Theory
537(2)
Exposure to Exchange Rate Risk
539(3)
Multinational Working-Capital Management
542(1)
International Financing and Capital Structure Decisions
543(1)
Direct Foreign Investment
544(2)
Summary
546(1)
Key Terms
546(1)
Study Questions
547(1)
Self-Test Problem
547(1)
Study Problems
548(1)
Web Works
548(1)
Comprehensive Problem
548(1)
Self-Test Solution
549(2)
Appendixes
551(24)
Appendix A Using a Calculator
551(12)
Appendix B Compound Sum of $1 -- FVIF i%, n years
563(2)
Appendix C Present Value of $1 -- PVIF i%, n years
565(2)
Appendix D Sum of an Annuity of $1 for n Periods -- FVIFA i%, n years
567(2)
Appendix E Present Value of an Annuity of $1 for n Periods -- PVIFA i%, n years
569(2)
Appendix F Check Figures for Selected End-of-Chapter Study Problems
571(4)
Glossary 575(10)
Indexes 585

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