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Foundations of Finance, 10th edition

Published by Pearson (February 15, 2019) © 2020

  • Arthur J. Keown
  • John D. Martin Baylor University
  • J William Petty

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For corporate finance courses.

The 5 key principles for the foundations of finance

Foundations of Finance presents key financial concepts, bolstered by real-world vignettes, cases and problem exercises. Using 5 principles, the authors introduce a multi-step approach to financial problem solving that appeals to students' math and numerical skills.

The 10th Edition continues to focus on valuation and incorporates vignettes based on financial decisions faced by real firms. Featuring new lecture videos, financial thinking, user feedback and changes inspired by the Tax Cuts and Jobs Act of 2017, the text equips students to effectively deal with issues in an ever-changing financial environment.

Hallmark features of this title

  • 5 principles provide students with a strong foundation of the key concepts in finance: 1. Cash flow is what matters, 2. Money has a time value, 3. Risk requires a reward, 4. Market prices are generally right and 5. Conflicts of interest can cause agency problems.
  • A multi-step approach to problem solving and analysis, 1. Formulate a solution strategy, 2. Crunch the numbers and 3. Analyze results, helps students develop these important skills.
  • A focus on valuation makes this key theme prominent in any discussion and examples.
  • Financial Calculators and other Decision Tools display solutions or recap equations to aid in students' understanding.
  • Concept Check questions at the end of major chapter sections highlight key ideas presented in each section.

New and updated features of this title

  • REVISED: Coverage is updated in response to the latest financial thought, reviewer comments, and passage of the Tax Cuts and Jobs Act of 2017. It includes recent developments in the financial markets, new tax laws and their implications, and changes to interest and exchange rates.
  • NEW: Streamlined presentation of chapter topics makes it easier for students to review and retain the material.
  • UPDATED: Chapter-Opening Vignettes tell stories about current, real-world companies (such as Disney) faced with a financial decision related to the chapter material.
  • NEW and UPDATED: Examples using real individuals and companies such as Nike and eBay, let students see concepts in action.
  • UPDATED: Mini Cases help students apply chapter concepts to realistic settings. Examination of the financial statements of retail giants like Walmart and Target is now included.
  • UPDATED: End-of-Chapter Study Problems provide extra practice opportunities and reflect changes to the US tax code.

Features of MyLab Finance for the 10th Edition

  • NEW: Pearson eText is an easy-to-use digital textbook, available with MyLab, which lets students read, highlight and take notes all in one place, even when offline.
  • Question Help on homework and practice questions help students master the concepts. Learning aids walk them through the problem, giving them assistance when they need it most.
  • The Study Plan gives students personalized recommendations, practice opportunities and learning aids to help them stay on track.
  • Using proven, field-tested technology, auto-graded Excel Projects let you seamlessly integrate Microsoft® Excel® content into your course without having to manually grade spreadsheets.

PART 1: THE SCOPE AND ENVIRONMENT OF FINANCIAL MANAGEMENT
1. An Introduction to the Foundations of Financial Management
2. The Financial Markets and Interest Rates
3. Understanding Financial Statements and Cash Flows
4. Evaluating a Firm's Financial Performance

PART 2: THE VALUATION OF FINANCIAL ASSETS
5. The Time Value of Money
6. The Meaning and Measurement of Risk and Return
7. The Valuation and Characteristics of Bonds
8. The Valuation and Characteristics of Stock
9. The Cost of Capital

PART 3: INVESTMENT IN LONG-TERM ASSETS
10. Capital-Budgeting Techniques and Practice
11. Cash Flows and Other Topics in Capital Budgeting

PART 4: CAPITAL STRUCTURE AND DIVIDEND POLICY
12. Determining the Financing Mix
13. Dividend Policy and Internal Financing

PART 5: WORKING-CAPITAL MANAGEMENT AND INTERNATIONAL BUSINESS FINANCE
14. Short-Term Financial Planning
15. Working-Capital Management
16. International Business Finance
17. Cash, Receivables, and Inventory Management

About our authors

Arthur J. Keown is the Department Head and R. B. Pamplin Professor of Finance at Virginia Polytechnic Institute and State University. He received his bachelor's degree from Ohio Wesleyan University, his MBA from the University of Michigan, and his doctorate from Indiana University. An award-winning teacher, he is a member of the Academy of Teaching Excellence; has received 5 Certificates of Teaching Excellence at Virginia Tech, the W. E. Wine Award for Teaching Excellence, and the Alumni Teaching Excellence Award; and in 1999 received the Outstanding Faculty Award from the State of Virginia. Professor Keown is widely published in academic journals. His work has appeared in the Journal of Finance, the Journal of Financial Economics, the Journal of Financial and Quantitative Analysis, the Journal of Financial Research, the Journal of Banking and Finance, Financial Management, the Journal of Portfolio Management, and many others. In addition to Foundations of Finance, 2 other of his books are widely used in college finance classes all over the country: Basic Financial Management and Personal Finance: Turning Money into Wealth. Professor Keown is a Fellow of the Decision Sciences Institute, was a member of the Board of Directors of the Financial Management Association, and is the head of the finance department at Virginia Tech. In addition, he served as the co-editor of the Journal of Financial Research for 6½ years and as the co-editor of the Financial Management Association's Survey and Synthesis series for 6 years. He lives with his wife in Blacksburg, Virginia, where he collects original art from Mad Magazine.

John D. Martin holds the Carr P. Collins Chair in Finance in the Hankamer School of Business at Baylor University, where he teaches in the Baylor EMBA programs and has 3 times been selected as the outstanding teacher. John joined the Baylor faculty in 1998 after spending 17 years on the faculty of the University of Texas at Austin. Over his career he has published over 50 articles in the leading finance journals, including papers in the Journal of Finance, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Journal of Monetary Economics, and Management Science. His recent research has spanned issues related to the economics of unconventional energy sources, the hidden cost of venture capital, and the valuation of firms filing Chapter 11. He is also co-author of several books, including Financial Management: Principles and Practice (13th Edition, Prentice Hall), Foundations of Finance (9th Edition, Prentice Hall), Theory of Finance (Dryden Press), Financial Analysis (3rd Edition, McGraw Hill), Valuation: The Art & Science of Corporate Investment Decisions (2nd Edition, Prentice Hall), and Value Based Management with Social Responsibility (2nd Edition, Oxford University Press).

William Petty, PhD, Baylor University, is Professor of Finance and W. W. Caruth Chair of Entrepreneurship. Dr. Petty teaches entrepreneurial finance, both at the undergraduate and graduate levels. He is a University Master Teacher. In 2008, the Acton Foundation for Entrepreneurship Excellence selected him as the National Entrepreneurship Teacher of the Year. His research interests include the financing of entrepreneurial firms and shareholder value-based management. He has served as the co-editor for the Journal of Financial Research and the editor of the Journal of Entrepreneurial Finance. He has published articles in various academic and professional journals including the Journal of Financial and Quantitative Analysis, Financial Management, Journal of Portfolio Management, Journal of Applied Corporate Finance, and Accounting Review. Dr. Petty is co-author of a leading textbook in small business and entrepreneurship, Small Business Management: Launching and Growing Entrepreneurial Ventures. He also co-authored Value-Based Management: Corporate America's Response to the Shareholder Revolution (2010). He serves on the Board of Directors of a publicly traded oil and gas firm. Finally, he serves on the Board of the Baylor Angel Network, a network of private investors who provide capital to startups and early-stage companies.

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