Foundations of Finance, 4/e
Arthur J. Keown, Virginia Polytechnic and State University
J. William Petty & John D. Martin, both of Baylor University
David F. Scott, University of Central Florida
Unique in its approach, this text provides students with an intuitive, conceptual understanding of the financial
decision-making process—rather than just introducing them to soon-forgotten formulas and calculations of finance.
And, by focusing on concept interrelationships, it explores the “big picture” and actual practice—i.e., financial
decision making rooted in current financial theory and in the current state of world economic conditions.
Throughout, Foundations of Finance eliminates non-essential material and keeps mathematics to a minimum—
presenting material at a level accessible to non-finance majors—but with a strong theoretical foundation necessary
for more specialized students.
FEATURES/BENEFITS
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NEW—Excel spreadsheets—Integrated in problems at the end of the appropriate chapters.
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NEW—Ch. 10, Cash Flows and Other Topics in Capital Budgeting was heavily revised using a more
intuitive approach. In addition, a new section on Options in Capital Budgeting was added.
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Gives students a sense of the dynamic nature of corporate finance.
A unique intuitive approach based on 10 principles of finance—Presents 10 intuitive, easy-to-understand
axioms representing the fundamental principles that drive the practice of corporate finance (in Ch. 1). Then
repeatedly revisits these axioms throughout the text in “Back to the Foundations” inserts, thus continually
tying concepts together and allowing students to take time out to reflect upon the meaning of the material just
presented.
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Gives students in-the-trenches insights into the application of theory to practice in the real world. Provides
perspective for anyone who is planning a career in business, and at the same time makes learning more
interesting.
NEW—Current coverage—Weaves “Enron Lessons” boxes throughout appropriate chapters, includes a box
on the impact of September 11th on Corporate Finance, and discusses the impact of the 2002 Economic
Stimulus Package.
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Makes it both easier for the student to understand and easier for the professor to teach.
NEW—Thoroughly revised Chapter 2 on Financial Markets and Interest Rates—Reflect the impact of the
economic downturn and Fed Monetary Policy on risk and return, cost of capital, corporate financing. The
chapter also discusses the significant differences between nominal and real interest rates.
NEW—Part-opening interviews with business professionals—e.g., a consultant who offers counsel as to
how a manager of any area within a firm should think about finance; a business valuation expert who talks
about the importance of an operating manager understanding what determines firm value, etc.
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Gives students a contemporary tool for time value of money calculations, dealing with valuation of financial
assets, and evaluating capital budgeting projects.
Helps students stay focused on the logic that drives finance, instead of merely memorizing formulas and
procedures (which may not neatly fit all the situations they'll encounter in the real world). Long after they've
forgotten some of the formulas they learned by cramming, they'll remember the axioms.
International coverage—Includes an entire chapter on International Business Finance (Ch. 17) as well as
chapter-end sections that discuss the international aspects of the material just presented.
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Provides students with a valuable overview of the importance and functioning of international business finance—
e.g., exchange rates—which are important topics regardless of what students' majors are.
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Extensive coverage of ethics—Ethics is covered as a core axiom and Ethics in Financial Management boxes
appear throughout.
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A refresher on accounting—Ch. 3, Understanding Financial Statements and Cash Flows.
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Shows students that ethical behavior is doing the right thing, and that ethical dilemmas are everywhere in finance.
Shows students that it is the language of business, and that a basic understanding of it is essential to a usable
understanding of finance.
Financial Management in Practice boxes.
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Demonstrates the implementation of theory through the use of practice.
CHAPTER PEDAGOGY
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Chapter-opening vignettes—Features a real-world, current story related to chapter material.
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Stimulates students' interest in the chapter topics to be discussed, and promotes classroom discussion of
companies' financial decisions.
Chapter-beginning learning objectives.
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Alerts students to key concepts, and keeps them aware of these study goals with references in the margins
throughout the chapter.
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Pause and Reflect inserts—In-text inserts that appear throughout the text.
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Concept Checks—Key ideas just presented are highlighted.
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Focuses students' attention on “the big picture.”
Gives students a chance to check their understanding of material in most major sections before moving on to the
next.
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Four-part approach to mastering vocabulary—Highlights key terms in text margins, defines them in italics
within the text and in the end-of-book glossary, and lists key terms, with page numbers, at the end of each
chapter.
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Comprehensive chapter-end problems.
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Helps students develop the professional vocabulary they will need to communicate effectively on the job.
Strengthens students' understanding of the material by giving them a chance to apply chapter concepts in a
realistic setting.
Internet applications—“Takin' It to the Net.”
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Directs students to key references, additional information, and related Web sites dealing with the topics covered
in each chapter.
CONTENTS
I. THE SCOPE AND ENVIRONMENT OF
FINANCIAL MANAGEMENT.
1. An Introduction to the Foundations of Financial
Management —The Ties That Bind.
2. The Financial Markets and Interest Rates.
3. Understanding Financial Statements and Cash
Flows.
4. Evaluating a Firm's Financial Performance.
II. VALUATION OF FINANCIAL ASSETS.
5. The Time Value of Money.
6. The Meaning and Measurement of Risk and
Return.
7. Valuation and Characteristics of Bonds.
8. Valuation and Characteristics of Stock.
III. INVESTMENT IN LONG-TERM ASSETS.
9. Capital-Budgeting Techniques and Practice.
10. Cash Flows and Other Topics in Capital
Budgeting.
11. Cost of Capital.
IV. CAPITAL STRUCTURE AND DIVIDEND
POLICY.
12. Determining the Financing Mix.
13. Dividend Policy and Internal Financing.
V. WORKING CAPITAL MANAGEMENT AND
INTERNATIONAL BUSINESS FINANCE.
14. Financial Forecasting, Planning, and Budgeting.
15. Introduction to Working-Capital Management.
16. Liquid Asset Management.
17. International Business Finance.
© 2003, 552 pp., Cloth 0-13-047982-9
SUPPLEMENTS
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Study Guide (0-13-046537-2)
ActiveBook Foundations of Finance (0-13046539-9)
Instructors Manual (0-13-046529-1)
Test Item File (0-13-046520-8)
Test Manager (0-13-046531-3)
PowerPoints (0-13-046532-1)
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Instructor's CD (0-13-046534-8)
EVA Tutor (0-13-046535-6)
Companion Website - Keown
o www.prenhall.com/keown
CourseCompasss with e-Book
o cms.prenhall.com/coursecompass/