Effects of a Community Population Health Initiative onBlood .docx

Effects of a Community Population Health Initiative on
Blood Pressure Control in Latinos
James R. Langabeer II, PhD, EdD; Timothy D. Henry, MD,
FACC; Carlos Perez Aldana, MS; Larissa DeLuna; Nora Silva,
MPA;
Tiffany Champagne-Langabeer, PhD, RD
Background-—Hypertension remains one of the most important,
modifiable cardiovascular risk factors. Yet, the largest minority
ethnic group (Hispanics/Latinos) often have different health
outcomes and behavior, making hypertension management more
difficult. We explored the effects of an American Heart
Association–sponsored population health intervention aimed at
modifying
behavior of Latinos living in Texas.
Methods and Results-—We enrolled 8071 patients, and 5714
(65.7%) completed the 90-day program (58.5 years �11.7; 59%
female) from July 2016 to June 2018. Navigators identified
patients with risk factors; initial and final blood pressure (BP)
readings
were performed in the physician’s office; and interim home
measurements were recorded telephonically. The intervention
incorporated home BP monitoring, fitness and nutritional
counseling, and regular follow-up. Primary outcomes were
change in
systolic BP and health-related quality of life. Using a univariate
paired-samples pre–post design, we found an average 5.5% (7.6-
mm Hg) improvement in systolic BP (139.1 versus 131.5,
t=10.32, P<0.001). Quality of life measured by the European
quality of
life 5-dimension visual analog scale improved from 0.79 to 0.82

(t=31.03, P<0.001). After multivariate regression analyses,
improvements in quality of life and overall body mass index
were significantly associated with reductions in systolic BP.
Conclusions-—A noninvasive, population health initiative that
encourages routine engagement in patients’ own BP control was
associated with improvements in systolic BP and quality of life
for this largely Latino community. (J Am Heart Assoc. 2018;7:
e010282. DOI: 10.1161/JAHA.118.010282.)
Key Words: blood pressure measurement/monitoring • ethnicity
• hypertension • population
H ypertension remains a major but modifiable risk factorfor
cardiovascular disease (CVD) and stroke in the
United States. It is estimated that the hypertension preva-
lence rates based on current guidelines affect 46% of the
population, or nearly 115 million adults in the United States
alone.1 The American Heart Association (AHA) established
strategic impact goals aimed at reducing CVD and stroke
deaths by 20% by the year 2020.2 The strategy introduced a
concept for cardiovascular health that is characterized by 7
metrics known as “Life’s Simple 7.”3 These metrics focus on
the patient’s self-engagement in monitoring their health and
key measures and emphasizes 4 health behaviors and 3
health factors, including blood pressure (BP) reduction.
Cardiovascular health has been shown to have ethnic and
racial variation due to genetic, culture, nutritional, socioeco-
nomic, and other factors.4,5 Hispanic and Latino people
(Latinos) compose the largest minority ethnic group in the
country and the fastest growing population in the United
States and will account for nearly a fifth of the total US
population by 2020.6 Understanding the cardiovascular health
of Latinos is a key concern for ambulatory population health.

Although Latinos have lower overall rates of heart disease
than non-Latinos, CVD is still the leading cause of death since
these patients seek treatment less often for cardiovascular
issues7 and are 40% less likely to achieve BP control.8
Community-based programs have begun to explore the use
of ambulatory and home-based BP monitoring (HBPM) to reach
specific populations.9–11 Although most hypertension diagno-
sis and monitoring has typically been carried out in office
settings, recent studies have shown that HBPM can be equally
as or more effective in diagnosing and managing hyper-
tension.12–14 Patient self-engagement and self-management
of their condition is associated with overall better physical,
From the School of Biomedical Informatics, The University of
Texas Health
Science Center Houston, TX (J.R.L., C.P.A., T.C.-L.); Division
of Cardiology,
Cedar-Sinai Smidt Heart Institute, Los Angeles, CA (T.D.H.);
SouthWest Affiliate,
American Heart Association, San Antonio, TX (L.D., N.S.).
Correspondence to: James R. Langabeer, PhD, EdD, University
of Texas,
7000 Fannin Street, Ste 1690, Houston, TX 77030. E-mails:
james.r.langa
[email protected]
Received July 9, 2018; accepted September 25, 2018.
ª 2018 The Authors. Published on behalf of the American Heart
Association,
Inc., by Wiley. This is an open access article under the terms of
the Creative
Commons Attribution-NonCommercial-NoDerivs License,
which permits use
and distribution in any medium, provided the original work is

properly cited,
the use is non-commercial and no modifications or adaptations
are made.
DOI: 10.1161/JAHA.118.010282 Journal of the American Heart
Association 1
ORIGINAL RESEARCH
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emotional, and social health outcomes.15 Patient-reported
measures via HBPM have also been shown to provide more
effective management of hypertension specifically when
combined with intensive therapeutic lifestyle interventions
such as fitness and nutritional counseling.16
Nevertheless, recent systematic reviews have noted
significant variability and contradictory findings relative to
the efficacy of HBPM and lifestyle interventions for CVD.17 In
this study, we explore the effects of a community-based
HBPM intervention targeted to a Latino population.
Methods

Study Design and Setting
This study was designed to identify primarily Latino patients
with CVD risk factors and to encourage home BP readings to
engage these patients actively in maintaining their own
health. This research was a population-based prospective
cohort study, and we utilized a pre–post study design to
assess changes in systolic BP (SBP) over time (90 days of
active engagement). The intervention incorporated lifestyle
interventions, routine follow-up from patient navigators, and
HBPM. The intervention was modeled after the AHA “Check.
Change. Control.” program.18 The initiative, called the Voel-
cker Hypertension Impact Project, was funded by the Max and
Minnie Tomerlin Voelcker Fund and organized by the AHA
SouthWest Affiliate. It was designed to explore whether a
noninvasive, ambulatory, quality-improvement program could
encourage patient engagement and effect change in control-
ling individual hypertension for the Latino population specif-
ically. The intervention used HBPM, multiple fitness and
nutritional counseling sessions, and routine follow-up by
patient navigators in a coordinated community population
health initiative. The study was conducted in San Antonio,
Texas (the seventh largest city in the United States, with
>56% Hispanic population). All patients were enrolled from 1
of 3 participating clinics in the University Health System, a
county-owned academic medical center in San Antonio.
Institutional review board approval was obtained from the
University of Texas Health Science Center at Houston.
Intervention
Nonclinical patient navigators provided patient screening,
consent, education, coaching, and follow-up. Navigators are
especially trained personnel who assist patients with the
process of care and are especially useful for overcoming
barriers and reducing disparities related to language or
cultural gaps.19 Eligibility criteria included adult Latino

patients with risk factors, including elevated, stage 1, or
stage 2 hypertension (>120/80 mm Hg). To complete the
program, the patient study duration required 90 consecutive
days and a minimum of 3 interim measurements. The first and
final BP readings were performed entirely in the clinic by the
provider. During the interim, home BP measurements were
obtained by navigators during follow-up phone calls with
patients (about 30% of all measurements) or follow-up visits
by the patients to the clinic.
Approximately 26% of the patients received BP cuffs
through the program (SmartHeart automatic arm digital
monitor; Veridian Healthcare). The remainder either were
given prescriptions to purchase the same monitor or stated
they had an existing digital arm cuff. All cuffs had to be for the
arm, and wrist monitor measurements were not permitted.
Patients were instructed to perform at least 2 repeated
measurements and to record all readings on paper for
subsequent follow-up with the navigator. Other specific
instructions to reduce measurement errors were provided,
including guidance on how to utilize monitoring devices,
proper arm and sitting position, timing, inflation techniques,
and the need for repeated measurements.20
During the office visit, brief (<5 minutes) nutritional and
fitness counseling was provided by the patient navigator and
the nurse. Nutritional patient resources were provided for the
DASH (Dietary Approaches to Stop Hypertension) diet, as well
as fitness, activity, and local wellness programs. The
intervention focused primarily on engaging patients in mon-
itoring their own BP and encouraging active participation in
their own cardiovascular health.
Variables and Data Sources
The data, analytic methods, and study materials will not be
made available to other researchers for purposes of repro-

ducing the results or replicating the procedure.
The primary dependent variable was the change in SBP
reading between the first and last measurements. We also
Clinical Perspective
What Is New?
• Most hypertension guidelines suggest incorporating out-of-
office measurements, yet little evidence exists about the
effectiveness in overall systolic blood pressure improvement.
• The inclusion of home blood pressure monitoring and lifestyle
interventions was associated with a 5.5% positive change in
systolic blood pressure for a largely Latino population.
What Are the Clinical Implications?
• Patients who present with controlled hypertension can
benefit from the inclusion of home blood pressure monitoring
to provide additional data points for medication management.
Association 2
Community Hypertension Initiative for Latinos Langabeer et al
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captured change in diastolic BP and quality of life (QOL), using
the European QOL 5-dimension (EQ-5D) visual analog scale.
Other variables included height and weight (to calculate
body mass index [BMI]; kg/m2), demographics (age, sex,
race, ethnicity), and medical history (prior stroke, diabetes
mellitus, and heart failure). Medication compliance was
measured as binary (1=yes, on antihypertensive medication;
0=no). Most clinical data were extracted from electronic
health records, including demographics, medications, medical
history, and BP measurements. A separate database was
maintained to track the fitness and nutritional counseling
activities by patient and date.
Statistical Analysis
Continuous variables are presented as mean�SD. Categorical
data are presented as percentages. Chi-square analyses were
used to assess differences between groups of categorical
data. Student t tests were used to examine univariate
differences between continuous variables. Baseline charac-
teristics were compared between compliant and noncompli-

ant participants (those who did not complete the
intervention), using t tests and chi-square tests. Multivariate
linear regression examined changes in SBP, controlling for the
demographic and patient baseline conditions. We modeled
the dependent variable (improvement in within-participant
SBP) as a positive number in the regression model, defined as
baseline SBP minus follow-up SBP. We assessed for multi-
collinearity between the variables using Pearson correlation
for continuous variables or Spearman correlation in the case
of binary variables. Using a cutoff of >0.7, we did not find
evidence of significant collinearity between any of the
variables. Statistical significance was defined as P<0.05.
SPSS Statistics v25 (IBM Corp) was utilized to perform all data
analyses.
Results
The study enrolled 8071 patients from July 2016 to June 2018
(24 months), and 5714 (65.7%) completed the program. The
average age for patients who completed the intervention was
58.5�11.7 years (range: 18–97 years), including 3353
women (58.7%), and 4069 patients (71.2%) identified as
Latino. Approximately 60% of the patients had a history of
diabetes mellitus, and 75% had a BMI greater than normal
ranges (ie, BMI >25), with a mean of 33.4 (considered obese
class I). The mean intervention time for participants was
98.1 days.
Before study initiation, no participants were adhering to
the AHA Life’s Simple 7 recommendations (including BP
management, diet, BP, fitness, and activity). The majority
(92.3%) were already placed on antihypertensive medication
before enrollment in the study and remained on medications
during the intervention. Unless complications were reported
in the interim, patients did not return to the physician’s office
until the completion of the program; therefore, changes to

medication were minimal. Only 110 patients (1.9%) had any
change in dosage recorded during the program. Of those
patients on medications, the majority had 1 primary medi-
cation for hypertension management including calcium
channel blocker in 30%, angiotensin-converting enzyme
inhibitors in 60%, and angiotensin II receptor blockers in
10%. The results from interim measurements provided
additional information for physicians to monitor medication
concordance and improve BP management following the
program’s completion. Table 1 summarizes the patient base-
line characteristics.
There were minor differences in the demographics and
baseline characteristics between those who did and did not
complete the program, including higher rates of stroke,
diabetes mellitus, prior heart failure, and baseline antihyper-
tensive medications in patients who completed the program.
Most patients dropped out of the program between the second
and third BP readings. For compliant participants, we had full
compliance for all readings during the program, largely
because of proactive follow-up by the patient navigator.
There was a significant 5.5% improvement in mean SBP
from 139.1 mm Hg at baseline to a final reading of
131.5 mm Hg (7.6 mm Hg, t=10.32, P<0.001). There was a
similar 6% improvement in diastolic BP. Average EQ-5D score
increased from 0.79 to 0.82 (t=31.03, P<0.001). Table 2
Table 1. Patient Characteristics
Variable Compliant Noncompliant P Value
Patients, n 5714 2357
Age, y, mean (SD) 58.5 (11.7) 57.14 (12.41) 0.001

Sex, female, n (%) 3353 (58.7) 1350 (57.3) 0.245
Body mass index, mean (SD) 33.4 (9.6) 33.7 (10.1) 0.112
Hispanic or Latino
ethnicity, n (%)
4069 (71.2) 1697 (72.0) 0.010
Race, n (%)
White 4720 (82.6) 1968 (83.5) <0.001
Black 571 (10.0) 276 (11.7)
All others 423 (7.4) 113 (4.8)
Baseline characteristics, n (%)
Diabetes mellitus 3539 (61.9) 1335 (56.7) <0.001
Prior stroke 466 (8.1) 157 (6.6) <0.001
Prior heart failure 692 (12.1) 207 (8.7) <0.001
Antihypertensive medication 5277 (92.3) 2086 (88.6) <0.001
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summarizes the outcome differences between the initial and
final readings for those who completed the program.
For patients who completed the intervention, there was a
reduction in within-participant mean SBP at each reading
across this consistent sample. The box plot in Figure shows
trend reduction in participants’ SBP over 5 measurements
during the 90-day period.
There was no significant difference between sexes for
either outcome variable. With the dependent variable (im-
provement in within-participant SBP) measured as a positive
number, we fit a multivariate regression model. After control-
ling for patient baseline and demographic factors, only BMI
and change in QOL persisted as significant factors in SBP
change in the final model (R2=0.092, P<0.001). Higher BMI
and greater improvement in QOL were factors positively

associated with improved SBP. Age, race, sex, ethnicity,
medication compliance, and prior medical history were not
significantly associated with reductions in SBP after controls.
Table 3 shows the regression results.
Discussion
We found that a targeted noninvasive intervention for Latinos,
incorporating HBPM and lifestyle counseling, was associated
with a reduction in mean SBP. We also observed an
improvement in reported QOL scores during the program
that were positively associated with SBP change. In addition,
after controls for patient and demographic factors, individuals
with greater BMI had the largest overall change. Cardiovas-
cular health has been shown to have ethnic and racial
variation, partially due to nutritional and cultural factors.
Better understanding of the link between BMI and BP control
is necessary, especially when focusing on the Latino commu-
nity. More frequent interim BP measurements can be used to
comprehensively augment patient medical management.
Other researchers have found similar results regarding the
relationship of targeted quality-improvement strategies in BP
control. In their review of 18 comparable interventional
programs across the United States, Anderson and colleagues
found that community interventions that include HBPM
resulted in BP improvements.21 Other quality-improvement
strategies have also been shown to result in positive change.
Walsh and colleagues conducted a systematic review of 54
previously published community quality-improvement pro-
grams and found a median reduction of 4.5 mm Hg in both
SBP and diastolic BP. They concluded that interventions in
which the physician care team is extended outside of the
office and to others (eg, navigators, nurse educators) result in
improvement in hypertension control.

Graarup and colleagues reported that involving patients in
effective education and communication surrounding their
condition results in improvement in patients’ quality of care.22
Similarly, Ivey and colleagues analyzed patients with both CVD
and diabetes mellitus and concluded that getting patients
involved in managing their own chronic conditions results in
better patient-reported outcomes, including emotional, phys-
ical, and social health.15 In contrast, Ryvicker and colleagues
conducted a randomized trial of 587 patients and did not find
that actively engaging the patient through similar mechanisms
resulted in a positive SBP change.11
Most hypertension guidelines suggest incorporating out-of-
office measurements, including those of the US Preventive
Task Force on Hypertension, the European Society for
Hypertension, and the World Hypertension League.23–25
However, studies involving the inclusion of HBPM have also
yielded conflicting results. Bosworth and colleagues con-
ducted a randomized trial of telemonitored HBPM and found
only moderate improvements in BP control.26 Alternatively, in
a 2-year study of older adults using nontelemonitored HBPM,
Tzourio and colleagues reported that routine HBPM resulted in
modest reductions of BP that improve significantly over
time.16 Band and colleagues suggest a comprehensive
approach to managing hypertension, including active patient
engagement and digital interventions such as HBPM.12
Legitimate concerns exist around the validity and accuracy
of HBPM equipment and the patient’s ability to monitor and
record readings correctly.20,27 Kronish and colleagues
reported that the level of patients’ experience and training
around proper use is a common problem. They further
established that the primary barriers to broader use of HBPM
include “compliance with the correct test protocol, accuracy

of tests results, out-of-pocket costs of home BP devices, and
time needed to instruct patients on home BP monitoring
problems.”28 They go on to report however that “white coat
hypertension” offers compelling evidence to support the
inclusion of repeated measurements outside the physician’s
office.26 Celis and colleagues recommend that clinics adopt
HBPM but conclude that it should not replace, but rather
complement, in-office and ambulatory measurements based
on concerns about the validity of readings.29
Lifestyle and nutritional counseling in the management of
patients with hypertension is considered level I evidence for
reducing cardiovascular risk.30 However, including such
counseling in clinic-based population health programs poses
Table 2. Quality Outcome by Phase
Measure Initial Final P Value
Systolic BP 139.1 (18.5) 131.5 (15.1) <0.001
Diastolic BP 76.8 (12.3) 72.2 (10.8) <0.001
Quality of life 0.79 (0.16) 0.82 (0.14) <0.001
Data shown as mean (SD). BP indicates blood pressure.
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administrative and personnel challenges that limit broader
utilization.31 Even if lifestyle counseling offers only minimal
positive change without the addition of antihypertensive
medication, most researchers recommend augmenting
patient management with these components.32,33
Prior studies have pointed to evidence gaps in the
diagnosis and treatment of CVD in the Latino community.34
In this study, we conclude that regular patient engagement
through their own HBPM, coupled with nutritional and fitness
counseling sessions, results in improvement in SBP control for
a Latino population.
Limitations and Future Research
First, this sample was not randomized, so it is possible that
our findings are partially based on inherent sample charac-

teristics or other factors for which we did not control. We
attempted to adjust for confounders by including patient
demographic and baseline characteristics in our models.
Future studies would benefit from randomization. In addition,
because this was a community intervention, we relied on
home-based BP readings, largely based on patients’ own
equipment. There are control, quality, and accuracy concerns
surrounding home readings, given equipment, timing, and
human factors. We attempted to control for these concerns
by doing all first and final readings in the clinic, providing
cuffs
to >25% of the patients, and instructing patients on appro-
priate use and positioning. Furthermore, because most
patients came into the study already compliant with BP
medications, this study does not address the impact of
antihypertensive medication changes during the study. Finally,
white coat or masked hypertension could affect measurement
in the study. We are unable to determine whether these
issues played a role, but the point of key analysis was each
patient’s change from baseline to final reading.
Given our findings, future research should examine other
community-based programs across other racial and ethnic
populations. Subsequent studies could explore BMI and QOL
in more detail. We also recommend large-scale studies to
positively confirm these findings across other regions.
Conclusion
A noninvasive population health intervention that extended
hypertension management outside the physician’s office and
incorporated routine HBPM and lifestyle counseling was
80
100

120
140
160
180
Initial BP2 BP3 BP4 Final
Sy
st
ol
ic
B
P
(m
m
H
g)
BP Measurement
Figure. Mean systolic BP by measurement. BP indicates blood
pressure.
Table 3. Regression Model Results
Variable D SBP b (95% CI) P Value
Age 0.045 (�0.001 to 0.091) 0.057

Sex 1.043 (�0.430 to 2.516) 0.165
Ethnicity �0.992 (�2.671 to 0.686) 0.246
BMI 0.118 (0.055–0.182) <0.001
Stroke �2.199 (�4.984 to 0.585) 0.122
Diabetes mellitus �0.284 (�1.854 to 1.286) 0.723
Heart failure �2.212 (�4.484 to 0.060) 0.056
Medication �2.405 (�4.939 to 0.129) 0.063
QOL change 0.315 (0.237–0.393) <0.001
BMI indicates body mass index; CI, confidence interval; QOL,
quality of life; SBP, systolic
blood pressure.
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effective at improving BP control and QOL for a Latino
population.
Sources of Funding
This works was partially supported by a grant from the
American Heart Association.
Disclosures
None.
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own inefficiencies and sloppy, haphazard product
development strategy.
The company lost money for the first time in 1994,
and as a result, Ben Cohen stepped down as CEO. Bob
Holland, a former consultant for McKinsey & Co. with a
reputation as a turnaround specialist, was tapped as
Cohen’s replacement. The company’s stock price
rebounded in 1995, as the market responded positively
to the steps made by Holland to right the company. The

stock price, however, floundered toward the end of
1996, following Holland’s resignation.
Over the last few years, Ben & Jerry’s has had a new
resurgence. Holland’s replacement, Perry Odak, has done
a number of things to improve the company’s financial
performance, and its reputation among Wall Street’s
or many companies, the decision would have been
an easy “yes.” However, Ben & Jerry’s Homemade
Inc. has always taken pride in doing things
differently. Its profits had been declining, but in 1995
the company was offered an opportunity to sell its
premium ice cream in the lucrative Japanese market.
However, Ben & Jerry’s turned down the business
because the Japanese firm that would have distributed
their product had failed to develop a reputation for
promoting social causes! Robert Holland Jr., Ben &
Jerry’s CEO at the time, commented that, “The only
reason to take the opportunity was to make money.”

Clearly, Holland, who resigned from the company in late
1996, thought there was more to running a business
than just making money.
The company’s cofounders, Ben Cohen and Jerry
Greenfield, opened the first Ben & Jerry’s ice cream shop
in 1978 in a vacant Vermont gas station with just
$12,000 of capital plus a commitment to run the business
in a manner consistent with their underlying values. Even
though it is more expensive, the company only buys milk
and cream from small local farms in Vermont. In addition,
7.5 percent of the company’s before-tax income is
donated to charity, and each of the company’s 750
employees receives three free pints of ice cream each day.
Many argue that Ben & Jerry’s philosophy and
commitment to social causes compromises its ability to
S T R I K I N G T H E
R IG H T BA L A N C E
BEN & JERRY'S

$
F
3
C H A P T E R 1 � A N O V E R V I E W O F F I N A N C I
A L M A N AG E M E N T4
The purpose of this chapter is to give you an idea of what
financial management
is all about. After you finish the chapter, you should have a
reasonably good idea
of what finance majors might do after graduation. You should
also have a better
understanding of (1) some of the forces that will affect financial
management in
the future; (2) the place of finance in a firm’s organization; (3)
the relationships
between financial managers and their counterparts in the
accounting, marketing,
production, and personnel departments; (4) the goals of a firm;
and (5) the way
financial managers can contribute to the attainment of these
goals. �
C A R E E R O P P O R T U N I T I E S I N F I N A N C E

Finance consists of three interrelated areas: (1) money and
capital markets, which
deals with securities markets and financial institutions; (2)
investments, which fo-
cuses on the decisions made by both individual and institutional
investors as
See http://
www.benjerry.com/
mission.html for Ben &
Jerry’s interesting mission
statement. It might be a
good idea to print it out and take it to
class for discussion.
Information on finance
careers, additional chapter
links, and practice quizzes
are available on the web
site to accompany this
text: http://www.harcourtcollege.
com/finance/concise3e.
analysts and institutional investors has benefited. Odak
quickly brought in a new management team to rework
the company’s production and sales operations, and he
aggressively opened new stores and franchises both in
the United States and abroad.

In April 2000, Ben & Jerry’s took a more dramatic
step to benefit its shareholders. It agreed to be acquired
by Unilever, a large Anglo-Dutch conglomerate that
owns a host of major brands including Dove Soap,
Lipton Tea, and Breyers Ice Cream. Unilever agreed to
pay $43.60 for each share of Ben & Jerry’s stock—a 66
percent increase over the price the stock traded at just
before takeover rumors first surfaced in December 1999.
The total price tag for Ben & Jerry’s was $326 million.
While the deal clearly benefited Ben & Jerry’s
shareholders, some observers believe that the company
“sold out” and abandoned its original mission. In
response to these concerns, Ben & Jerry’s will retain its
Vermont headquarters and its separate board, and its
social missions will remain intact. Others have
suggested that Ben & Jerry’s philosophy may even
induce Unilever to increase its own corporate
philanthropy. Despite these assurances, it still remains

to be seen whether Ben & Jerry’s vision can be
maintained within the confines of a large conglomerate.
As you will see throughout the book, many of today’s
companies face challenges similar to those of Ben &
Jerry’s. Every day, corporations struggle with decisions
such as these: Is it fair to our labor force to shift
production overseas? What is the appropriate level of
compensation for senior management? Should we
increase, or decrease, our charitable contributions? In
general, how do we balance social concerns against the
need to create shareholder value? �
5
they choose securities for their investment portfolios; and (3)
financial manage-
ment, or “business finance,” which involves decisions within
firms. The career
opportunities within each field are many and varied, but
financial managers
must have a knowledge of all three areas if they are to do their
jobs well.
MONEY AND CAPITAL MARKETS

Many finance majors go to work for financial institutions,
including banks, in-
surance companies, mutual funds, and investment banking
firms. For success
here, one needs a knowledge of valuation techniques, the factors
that cause in-
terest rates to rise and fall, the regulations to which financial
institutions are
subject, and the various types of financial instruments
(mortgages, auto loans,
certificates of deposit, and so on). One also needs a general
knowledge of all as-
pects of business administration, because the management of a
financial insti-
tution involves accounting, marketing, personnel, and computer
systems, as
well as financial management. An ability to communicate, both
orally and in
writing, is important, and “people skills,” or the ability to get
others to do their
jobs well, are critical.
INVESTMENTS
Finance graduates who go into investments often work for a
brokerage house
such as Merrill Lynch, either in sales or as a security analyst.
Others work for
banks, mutual funds, or insurance companies in the management
of their in-
vestment portfolios; for financial consulting firms advising
individual investors
or pension funds on how to invest their capital; for investment
banks whose pri-
mary function is to help businesses raise new capital; or as

financial planners
whose job is to help individuals develop long-term financial
goals and portfolios.
The three main functions in the investments area are sales,
analyzing individual
securities, and determining the optimal mix of securities for a
given investor.
FINANCIAL MANAGEMENT
Financial management is the broadest of the three areas, and the
one with the
most job opportunities. Financial management is important in
all types of busi-
nesses, including banks and other financial institutions, as well
as industrial and
retail firms. Financial management is also important in
governmental opera-
tions, from schools to hospitals to highway departments. The
job opportunities
in financial management range from making decisions regarding
plant expan-
sions to choosing what types of securities to issue when
financing expansion.
Financial managers also have the responsibility for deciding the
credit terms
under which customers may buy, how much inventory the firm
should carry,
how much cash to keep on hand, whether to acquire other firms
(merger analy-
sis), and how much of the firm’s earnings to plow back into the
business versus
pay out as dividends.
Regardless of which area a finance major enters, he or she will
need a knowl-

edge of all three areas. For example, a bank lending officer
cannot do his or her
Consult http://
www.careers-in-
business.com for an
excellent site containing
information on a variety of
business career areas, listings of current
jobs, and a variety of other reference
materials.
SELF-TEST QUESTIONS
What are the three main areas of finance?
If you have definite plans to go into one area, why is it
necessary that you
know something about the other areas?
Why is it necessary for business students who do not plan to
major in fi-
nance to understand the basics of finance?
job well without a good understanding of financial management,
because he or
she must be able to judge how well a business is being operated.
The same thing

holds true for Merrill Lynch’s security analysts and
stockbrokers, who must have
an understanding of general financial principles if they are to
give their cus-
tomers intelligent advice. Similarly, corporate financial
managers need to know
what their bankers are thinking about, and they also need to
know how investors
judge a firm’s performance and thus determine its stock price.
So, if you decide to
make finance your career, you will need to know something
about all three areas.
But suppose you do not plan to major in finance. Is the subject
still important
to you? Absolutely, for two reasons: (1) You need a knowledge
of finance to make
many personal decisions, ranging from investing for your
retirement to decid-
ing whether to lease versus buy a car. (2) Virtually all important
business deci-
sions have financial implications, so important decisions are
generally made by
teams from the accounting, finance, legal, marketing, personnel,
and production
departments. Therefore, if you want to succeed in the business
arena, you must
be highly competent in your own area, say, marketing, but you
must also have a
familiarity with the other business disciplines, including
finance.
Thus, there are financial implications in virtually all business
decisions, and nonfi-
nancial executives simply must know enough finance to work
these implications into

their own specialized analyses.1 Because of this, every student
of business, regard-
less of his or her major, should be concerned with financial
management.
1 It is an interesting fact that the course “Financial Management
for Nonfinancial Executives” has
the highest enrollment in most executive development programs.
F I N A N C I A L M A N AG E M E N T
I N T H E N E W M I L L E N N I U M
When financial management emerged as a separate field of
study in the early
1900s, the emphasis was on the legal aspects of mergers, the
formation of new
firms, and the various types of securities firms could issue to
raise capital. Dur-
ing the Depression of the 1930s, the emphasis shifted to
bankruptcy and reor-
ganization, corporate liquidity, and the regulation of security
markets. During
the 1940s and early 1950s, finance continued to be taught as a
descriptive, in-
stitutional subject, viewed more from the standpoint of an
outsider rather than
that of a manager. However, a movement toward theoretical
analysis began
during the late 1950s, and the focus shifted to managerial
decisions designed to
maximize the value of the firm.
7

The focus on value maximization continues as we begin the 21st
century.
However, two other trends are becoming increasingly important:
(1) the glob-
alization of business and (2) the increased use of information
technology. Both
of these trends provide companies with exciting new
opportunities to increase
profitability and reduce risks. However, these trends are also
leading to in-
creased competition and new risks. To emphasize these points
throughout the
book, we regularly profile how companies or industries have
been affected by
increased globalization and changing technology. These profiles
are found in
the boxes labeled “Global Perspectives” and “Technology
Matters.”
GLOBALIZAT ION OF BUSINESS
Many companies today rely to a large and increasing extent on
overseas opera-
tions. Table 1-1 summarizes the percentage of overseas
revenues and profits for
10 well-known corporations. Very clearly, these 10 “American”
companies are
really international concerns.
Four factors have led to the increased globalization of
businesses: (1) Im-
provements in transportation and communications lowered
shipping costs and
made international trade more feasible. (2) The increasing
political clout of
consumers, who desire low-cost, high-quality products. This has

helped lower
trade barriers designed to protect inefficient, high-cost domestic
manufacturers
and their workers. (3) As technology has become more
advanced, the costs of
developing new products have increased. These rising costs
have led to joint
ventures between such companies as General Motors and
Toyota, and to global
operations for many firms as they seek to expand markets and
thus spread
development costs over higher unit sales. (4) In a world
populated with multi-
national firms able to shift production to wherever costs are
lowest, a firm
whose manufacturing operations are restricted to one country
cannot compete
unless costs in its home country happen to be low, a condition
that does not
F I N A N C I A L M A N AG E M E N T I N T H E N E W
M I L L E N N I U M
T A B L E 1 - 1
PERCENTAGE OF REVENUE PERCENTAGE OF NET
INCOME
COMPANY ORIGINATED OVERSEAS GENERATED
OVERSEAS
Chase Manhattan 23.9 21.9
Coca-Cola 61.2 65.1
Exxon Mobil 71.8 62.7
General Electric 31.7 22.8
General Motors 26.3 55.3
IBM 57.5 49.6

McDonald’s 61.6 60.9
Merck 21.6 43.4
Minn. Mining & Mfg. 52.1 27.2
Walt Disney 15.4 16.6
SOURCE: Forbes Magazine’s 1999 Ranking of the 100 Largest
U.S. Multinationals; Forbes, July 24, 2000,
335–338.
Percentage of Revenue and Net Income from Overseas
Operations
for 10 Well-Known Corporations
Check out http://
www.nummi.com/
home.htm to find out
more about New United
Motor Manufacturing, Inc.
(NUMMI), the joint venture between
Toyota and General Motors. Read about
NUMMI’s history and organizational
goals.
necessarily exist for many U.S. corporations. As a result of
these four factors,
survival requires that most manufacturers produce and sell
globally.
Service companies, including banks, advertising agencies, and
accounting

firms, are also being forced to “go global,” because these firms
can best serve their
multinational clients if they have worldwide operations. There
will, of course, al-
ways be some purely domestic companies, but the most dynamic
growth, and the
best employment opportunities, are often with companies that
operate worldwide.
Even businesses that operate exclusively in the United States
are not immune
to the effects of globalization. For example, the costs to a
homebuilder in rural
Nebraska are affected by interest rates and lumber prices —
both of which are de-
termined by worldwide supply and demand conditions.
Furthermore, demand for
the homebuilder’s houses is influenced by interest rates and also
by conditions in
the local farm economy, which depend to a large extent on
foreign demand for
wheat. To operate efficiently, the Nebraska builder must be able
to forecast the de-
mand for houses, and that demand depends on worldwide
events. So, at least some
knowledge of global economic conditions is important to
virtually everyone, not
just to those involved with businesses that operate
internationally.
INFORMATION TECHNOLOGY
As we advance into the new millennium, we will see continued
advances in com-
puter and communications technology, and this will continue to
revolutionize the

way financial decisions are made. Companies are linking
networks of personal
During the past 20 years, Coca-Cola has createdtremendous
value for its shareholders. A
$10,000 investment in Coke stock in January 1980 would have
grown to nearly $600,000 by mid-1998. A large part of that im-
pressive growth was due to Coke’s overseas expansion program.
Today nearly 75 percent of Coke’s profit comes from overseas,
and Coke sells roughly half of the world’s soft drinks.
More recently, Coke has discovered that there are also risks
when investing overseas. Indeed, between mid-1998 and Janu-
ary 2001, Coke’s stock fell by roughtly a third—which means
that the $600,000 stock investment decreased in value to
$400,000 in about 2.5 years. Coke’s poor performance during
this period was due in large part to troubles overseas. Weak
economic conditions in Brazil, Germany, Japan, Southeast Asia,
Venezuela, Colombia, and Russia, plus a quality scare in Bel-
gium and France, hurt the company’s bottom line.
Despite its recent difficulties, Coke remains committed to its
global vision. Coke is also striving to learn from these difficul-
ties. The company’s leaders have acknowledged that Coke may
have become overly centralized. Centralized control enabled
Coke
to standardize quality and to capture operating efficiencies, both
of which initially helped to establish its brand name throughout
the world. More recently, however, Coke has become concerned
that too much centralized control has made it slow to respond to
changing circumstances and insensitive to differences among
the various local markets it serves.
Coke’s CEO, Douglas N. Daft, reflected these concerns in a re-
cent editorial that was published in the March 27, 2000, edi-

tion of Financial Times. Daft’s concluding comments appear
below:
So overall, we will draw on a long-standing belief that Coca-
Cola always flourishes when our people are allowed to use
their insight to build the business in ways best suited to
their local culture and business conditions.
We will, of course, maintain clear order. Our small corpo-
rate team will communicate explicitly the clear strategy, pol-
icy, values, and quality standards needed to keep us cohe-
sive and efficient. But just as important, we will also make
sure we stay out of the way of our local people and let them
do their jobs. That will enhance significantly our ability to
unlock growth opportunities, which will enable us to consis-
tently meet our growth expectations.
In our recent past, we succeeded because we understood
and appealed to global commonalties. In our future, we’ll
succeed because we will also understand and appeal to local
differences. The 21st century demands nothing less.
COKE RIDES THE GLOBAL ECONOMY WAVE
For more information
about the Coca-Cola
Company, go to
http://www.thecoca-
colacompany.com/world/
index.html, where you can find profiles
of Coca-Cola’s presence in foreign
countries. You may follow additional
links to Coca-Cola web sites in foreign
countries.

9F I N A N C I A L M A N AG E M E N T I N T H E N E W
M I L L E N N I U M
eTOYS TAKES ON TOYS “ ” USR
The toy market illustrates how electronic commerce is chang-
ing the way firms operate. Over the past decade, this market
has been dominated by Toys “ ” Us, although Toys “ ” Us has
faced increasing competition from retail chains such as Wal-
Mart, Kmart, and Target. Then, in 1997, Internet startup eToys
Inc. began selling and distributing toys through the Internet.
When eToys first emerged, many analysts believed that the
Internet provided toy retailers with a sensational opportunity.
This point was made amazingly clear in May 1999 when eToys
issued stock to the public in an initial public offering (IPO).
The stock immediately rose from its $20 offering price to $76
per share, and the company’s market capitalization (calculated
by multiplying stock price by the number of shares outstanding)
was a mind-blowing $7.8 billion.
To put this valuation in perspective, eToys’ market value at
the time of the offering ($7.8 billion) was 35 percent greater
than that of Toys “ ” Us ($5.7 billion). eToys’ valuation was
particularly startling given that the company had yet to earn a
profit. (It lost $73 million in the year ending March 1999.)
Moreover, while Toys “ ” Us had nearly 1,500 stores and rev-
enues in excess of $11 billion, eToys had no stores and rev-
enues of less than $35 million.
Investors were clearly expecting that an increasing number
of toys will be bought over the Internet. One analyst esti-
mated at the time of the offering that eToys would be worth
$10 billion within a decade. His analysis assumed that in 10

years the toy market would total $75 billion, with $20 billion
R
R
RR
coming from online sales. Indeed, online sales do appear to
be here to stay. For many customers, online shopping is
quicker and more convenient, particularly for working parents
of young children, who purchase the lion’s share of toys. From
the company’s perspective, Internet commerce has a number
of other advantages. The costs of maintaining a web site and
distributing toys online may be smaller than the costs of
maintaining and managing 1,500 retail stores.
Not surprisingly, Toys “ ” Us did not sit idly by — it re-
cently announced plans to invest $64 million in a separate on-
line subsidiary, Toysrus.com. The company also announced an
online partnership with Internet retailer Amazon.com. In addi-
tion, Toys “ ” Us is redoubling its efforts to make traditional
store shopping more enjoyable and less frustrating.
While the Internet provides toy companies with new and in-
teresting opportunities, these companies also face tremendous
risks as they try to respond to the changing technology. In-
deed, in the months following eToys’ IPO, Toys “ ” Us’ stock
fell
sharply, and by January 2000, its market value was only slightly
above $2 billion. Since then, Toys “ ” Us stock has rebounded,
and its market capitalization was once again approaching $5 bil-
lion. The shareholders of eToys were less fortunate. Concerns
about inventory management during the 1999 holiday season
and the collapse of many Internet stocks spurred a tremendous
collapse in eToys’ stock — its stock fell from a post–IPO high

of $76 a share to $0.31 a share in January 2001. Two months
later, eToys declared bankruptcy.
R
R
R
R
computers to one another, to the firms’ own mainframe
computers, to the Inter-
net and the World Wide Web, and to their customers’ and
suppliers’ computers.
Thus, financial managers are increasingly able to share
information and to have
“face-to-face” meetings with distant colleagues through video
teleconferencing.
The ability to access and analyze data on a real-time basis also
means that quan-
titative analysis is becoming more important, and “gut feel” less
sufficient, in
business decisions. As a result, the next generation of financial
managers will need
stronger computer and quantitative skills than were required in
the past.
Changing technology provides both opportunities and threats.
Improved
technology enables businesses to reduce costs and expand
markets. At the same
time, however, changing technology can introduce additional
competition,
which may reduce profitability in existing markets.

The banking industry provides a good example of the double-
edged technol-
ogy sword. Improved technology has allowed banks to process
information
much more efficiently, which reduces the costs of processing
checks, providing
credit, and identifying bad credit risks. Technology has also
allowed banks to
serve customers better. For example, today bank customers use
automatic teller
machines (ATMs) everywhere, from the supermarket to the local
mall. Today,
many banks also offer products that allow their customers to use
the Internet to
manage their accounts and to pay bills. However, changing
technology also
threatens banks’ profitability. Many customers no longer feel
compelled to use a
local bank, and the Internet allows them to shop worldwide for
the best deposit
and loan rates. An even greater threat is the continued
development of elec-
tronic commerce. Electronic commerce allows customers and
businesses to
transact directly, thus reducing the need for intermediaries such
as commercial
banks. In the years ahead, financial managers will have to
continue to keep
abreast of technological developments, and they must be
prepared to adapt their

businesses to the changing environment.
SELF-TEST QUESTIONS
What two key trends are becoming increasingly important in
financial man-
agement today?
How has financial management changed from the early 1900s to
the present?
How might a person become better prepared for a career in
financial man-
agement?
T H E F I N A N C I A L S TA F F ’ S R E S P O N S I B I L
I T I E S
The financial staff’s task is to acquire and then help operate
resources so as to
maximize the value of the firm. Here are some specific
activities:
1. Forecasting and planning. The financial staff must coordinate
the plan-
ning process. This means they must interact with people from
other de-
partments as they look ahead and lay the plans that will shape
the firm’s
future.
2. Major investment and financing decisions. A successful firm
usually
has rapid growth in sales, which requires investments in plant,
equip-
ment, and inventory. The financial staff must help determine the

optimal
sales growth rate, help decide what specific assets to acquire,
and then
choose the best way to finance those assets. For example,
should the firm
finance with debt, equity, or some combination of the two, and
if debt is
used, how much should be long term and how much short term?
3. Coordination and control. The financial staff must interact
with other
personnel to ensure that the firm is operated as efficiently as
possible. All
business decisions have financial implications, and all managers
— finan-
cial and otherwise — need to take this into account. For
example, mar-
keting decisions affect sales growth, which in turn influences
investment
requirements. Thus, marketing decision makers must take
account of
how their actions affect and are affected by such factors as the
availability
of funds, inventory policies, and plant capacity utilization.
4. Dealing with the financial markets. The financial staff must
deal with
the money and capital markets. As we shall see in Chapter 5,
each firm af-
fects and is affected by the general financial markets where
funds are
11A LT E R N AT I V E F O R M S O F B U S I N E S S O R
GA N I Z AT I O N

SELF-TEST QUESTION
What are some specific activities with which a firm’s finance
staff is involved?
raised, where the firm’s securities are traded, and where
investors either
make or lose money.
5. Risk management. All businesses face risks, including natural
disasters
such as fires and floods, uncertainties in commodity and
security mar-
kets, volatile interest rates, and fluctuating foreign exchange
rates.
However, many of these risks can be reduced by purchasing
insurance
or by hedging in the derivatives markets. The financial staff is
respon-
sible for the firm’s overall risk management program, including
identi-
fying the risks that should be managed and then managing them
in the
most efficient manner.
In summary, people working in financial management make
decisions regarding
which assets their firms should acquire, how those assets should
be financed,
and how the firm should conduct its operations. If these
responsibilities are per-
formed optimally, financial managers will help to maximize the
values of their
firms, and this will also contribute to the welfare of consumers
and employees.

Sole Proprietorship
An unincorporated business
owned by one individual.
A LT E R N AT I V E F O R M S
O F B U S I N E S S O R GA N I Z AT I O N
There are three main forms of business organization: (1) sole
proprietorships,
(2) partnerships, and (3) corporations, plus several hybrid
forms. In terms of
numbers, about 80 percent of …
SOURCE: Courtesy BEN & JERRY’S HOMEMADE, INC.
www.benjerry.com
CHAPTER
A n O v e r v i e w o f F i na nc i a l
Ma na ge me n t1
make money. For example, in a recent article in Fortune
magazine, Alex Taylor III commented that, “Operating a
business is tough enough. Once you add social goals to
the demands of serving customers, making a profit, and

returning value to shareholders, you tie yourself up in
knots.”
Ben & Jerry’s financial performance has had its ups
and downs. While the company’s stock grew by leaps
and bounds through the early 1990s, problems began to
arise in 1993. These problems included increased
competition in the premium ice cream market, along
with a leveling off of sales in that market, plus their
own inefficiencies and sloppy, haphazard product
development strategy.
The company lost money for the first time in 1994,
and as a result, Ben Cohen stepped down as CEO. Bob
Holland, a former consultant for McKinsey & Co. with a
reputation as a turnaround specialist, was tapped as
Cohen’s replacement. The company’s stock price
rebounded in 1995, as the market responded positively
to the steps made by Holland to right the company. The
stock price, however, floundered toward the end of

1996, following Holland’s resignation.
Over the last few years, Ben & Jerry’s has had a new
resurgence. Holland’s replacement, Perry Odak, has done
a number of things to improve the company’s financial
performance, and its reputation among Wall Street’s
or many companies, the decision would have been
an easy “yes.” However, Ben & Jerry’s Homemade
Inc. has always taken pride in doing things
differently. Its profits had been declining, but in 1995
the company was offered an opportunity to sell its
premium ice cream in the lucrative Japanese market.
However, Ben & Jerry’s turned down the business
because the Japanese firm that would have distributed
their product had failed to develop a reputation for
promoting social causes! Robert Holland Jr., Ben &
Jerry’s CEO at the time, commented that, “The only
reason to take the opportunity was to make money.”
Clearly, Holland, who resigned from the company in late

1996, thought there was more to running a business
than just making money.
The company’s cofounders, Ben Cohen and Jerry
Greenfield, opened the first Ben & Jerry’s ice cream shop
in 1978 in a vacant Vermont gas station with just
$12,000 of capital plus a commitment to run the business
in a manner consistent with their underlying values. Even
though it is more expensive, the company only buys milk
and cream from small local farms in Vermont. In addition,
7.5 percent of the company’s before-tax income is
donated to charity, and each of the company’s 750
employees receives three free pints of ice cream each day.
Many argue that Ben & Jerry’s philosophy and
commitment to social causes compromises its ability to
S T R I K I N G T H E
R IG H T BA L A N C E
BEN & JERRY'S
$
F

3
The purpose of this chapter is to give you an idea of what
financial management
is all about. After you finish the chapter, you should have a
reasonably good idea
of what finance majors might do after graduation. You should
also have a better
understanding of (1) some of the forces that will affect financial
management in
the future; (2) the place of finance in a firm’s organization; (3)
the relationships
between financial managers and their counterparts in the
accounting, marketing,
production, and personnel departments; (4) the goals of a firm;
and (5) the way
financial managers can contribute to the attainment of these
goals. �
Finance consists of three interrelated areas: (1) money and
capital markets, which

deals with securities markets and financial institutions; (2)
investments, which fo-
cuses on the decisions made by both individual and institutional
investors as
See http://
www.benjerry.com/
mission.html for Ben &
Jerry’s interesting mission
statement. It might be a
good idea to print it out and take it to
class for discussion.
Information on finance
careers, additional chapter
links, and practice quizzes
are available on the web
site to accompany this
text: http://www.harcourtcollege.
com/finance/concise3e.
analysts and institutional investors has benefited. Odak
quickly brought in a new management team to rework
the company’s production and sales operations, and he
aggressively opened new stores and franchises both in
the United States and abroad.
In April 2000, Ben & Jerry’s took a more dramatic
step to benefit its shareholders. It agreed to be acquired

by Unilever, a large Anglo-Dutch conglomerate that
owns a host of major brands including Dove Soap,
Lipton Tea, and Breyers Ice Cream. Unilever agreed to
pay $43.60 for each share of Ben & Jerry’s stock—a 66
percent increase over the price the stock traded at just
before takeover rumors first surfaced in December 1999.
The total price tag for Ben & Jerry’s was $326 million.
While the deal clearly benefited Ben & Jerry’s
shareholders, some observers believe that the company
“sold out” and abandoned its original mission. In
response to these concerns, Ben & Jerry’s will retain its
Vermont headquarters and its separate board, and its
social missions will remain intact. Others have
suggested that Ben & Jerry’s philosophy may even
induce Unilever to increase its own corporate
philanthropy. Despite these assurances, it still remains
to be seen whether Ben & Jerry’s vision can be
maintained within the confines of a large conglomerate.

As you will see throughout the book, many of today’s
companies face challenges similar to those of Ben &
Jerry’s. Every day, corporations struggle with decisions
such as these: Is it fair to our labor force to shift
production overseas? What is the appropriate level of
compensation for senior management? Should we
increase, or decrease, our charitable contributions? In
general, how do we balance social concerns against the
need to create shareholder value? �
5
they choose securities for their investment portfolios; and (3)
financial manage-
ment, or “business finance,” which involves decisions within
firms. The career
opportunities within each field are many and varied, but
financial managers
must have a knowledge of all three areas if they are to do their
jobs well.
MONEY AND CAPITAL MARKETS
Many finance majors go to work for financial institutions,
including banks, in-

surance companies, mutual funds, and investment banking
firms. For success
here, one needs a knowledge of valuation techniques, the factors
that cause in-
terest rates to rise and fall, the regulations to which financial
institutions are
subject, and the various types of financial instruments
(mortgages, auto loans,
certificates of deposit, and so on). One also needs a general
knowledge of all as-
pects of business administration, because the management of a
financial insti-
tution involves accounting, marketing, personnel, and computer
systems, as
well as financial management. An ability to communicate, both
orally and in
writing, is important, and “people skills,” or the ability to get
others to do their
jobs well, are critical.
INVESTMENTS
Finance graduates who go into investments often work for a
brokerage house
such as Merrill Lynch, either in sales or as a security analyst.
Others work for
banks, mutual funds, or insurance companies in the management
of their in-
vestment portfolios; for financial consulting firms advising
individual investors
or pension funds on how to invest their capital; for investment
banks whose pri-
mary function is to help businesses raise new capital; or as
financial planners
whose job is to help individuals develop long-term financial
goals and portfolios.

The three main functions in the investments area are sales,
analyzing individual
securities, and determining the optimal mix of securities for a
given investor.
FINANCIAL MANAGEMENT
Financial management is the broadest of the three areas, and the
one with the
most job opportunities. Financial management is important in
all types of busi-
nesses, including banks and other financial institutions, as well
as industrial and
retail firms. Financial management is also important in
governmental opera-
tions, from schools to hospitals to highway departments. The
job opportunities
in financial management range from making decisions regarding
plant expan-
sions to choosing what types of securities to issue when
financing expansion.
Financial managers also have the responsibility for deciding the
credit terms
under which customers may buy, how much inventory the firm
should carry,
how much cash to keep on hand, whether to acquire other firms
(merger analy-
sis), and how much of the firm’s earnings to plow back into the
business versus
pay out as dividends.
Regardless of which area a finance major enters, he or she will
need a knowl-
edge of all three areas. For example, a bank lending officer
cannot do his or her

Consult http://
www.careers-in-
business.com for an
excellent site containing
information on a variety of
business career areas, listings of current
jobs, and a variety of other reference
materials.
SELF-TEST QUESTIONS
What are the three main areas of finance?
If you have definite plans to go into one area, why is it
necessary that you
know something about the other areas?
Why is it necessary for business students who do not plan to
major in fi-
nance to understand the basics of finance?
job well without a good understanding of financial management,
because he or
she must be able to judge how well a business is being operated.
The same thing
holds true for Merrill Lynch’s security analysts and
stockbrokers, who must have
an understanding of general financial principles if they are to

give their cus-
tomers intelligent advice. Similarly, corporate financial
managers need to know
what their bankers are thinking about, and they also need to
know how investors
judge a firm’s performance and thus determine its stock price.
So, if you decide to
make finance your career, you will need to know something
about all three areas.
But suppose you do not plan to major in finance. Is the subject
still important
to you? Absolutely, for two reasons: (1) You need a knowledge
of finance to make
many personal decisions, ranging from investing for your
retirement to decid-
ing whether to lease versus buy a car. (2) Virtually all important
business deci-
sions have financial implications, so important decisions are
generally made by
teams from the accounting, finance, legal, marketing, personnel,
and production
departments. Therefore, if you want to succeed in the business
arena, you must
be highly competent in your own area, say, marketing, but you
must also have a
familiarity with the other business disciplines, including
finance.
Thus, there are financial implications in virtually all business
decisions, and nonfi-
nancial executives simply must know enough finance to work
these implications into
their own specialized analyses.1 Because of this, every student
of business, regard-
less of his or her major, should be concerned with financial

management.
1 It is an interesting fact that the course “Financial Management
for Nonfinancial Executives” has
the highest enrollment in most executive development programs.
F I N A N C I A L M A N AG E M E N T
I N T H E N E W M I L L E N N I U M
When financial management emerged as a separate field of
study in the early
1900s, the emphasis was on the legal aspects of mergers, the
formation of new
firms, and the various types of securities firms could issue to
raise capital. Dur-
ing the Depression of the 1930s, the emphasis shifted to
bankruptcy and reor-
ganization, corporate liquidity, and the regulation of security
markets. During
the 1940s and early 1950s, finance continued to be taught as a
descriptive, in-
stitutional subject, viewed more from the standpoint of an
outsider rather than
that of a manager. However, a movement toward theoretical
analysis began
during the late 1950s, and the focus shifted to managerial
decisions designed to
maximize the value of the firm.
7
The focus on value maximization continues as we begin the 21st
century.
However, two other trends are becoming increasingly important:

(1) the glob-
alization of business and (2) the increased use of information
technology. Both
of these trends provide companies with exciting new
opportunities to increase
profitability and reduce risks. However, these trends are also
leading to in-
creased competition and new risks. To emphasize these points
throughout the
book, we regularly profile how companies or industries have
been affected by
increased globalization and changing technology. These profiles
are found in
the boxes labeled “Global Perspectives” and “Technology
Matters.”
GLOBALIZAT ION OF BUSINESS
Many companies today rely to a large and increasing extent on
overseas opera-
tions. Table 1-1 summarizes the percentage of overseas
revenues and profits for
10 well-known corporations. Very clearly, these 10 “American”
companies are
really international concerns.
Four factors have led to the increased globalization of
businesses: (1) Im-
provements in transportation and communications lowered
shipping costs and
made international trade more feasible. (2) The increasing
political clout of
consumers, who desire low-cost, high-quality products. This has
helped lower
trade barriers designed to protect inefficient, high-cost domestic
manufacturers

and their workers. (3) As technology has become more
advanced, the costs of
developing new products have increased. These rising costs
have led to joint
ventures between such companies as General Motors and
Toyota, and to global
operations for many firms as they seek to expand markets and
thus spread
development costs over higher unit sales. (4) In a world
populated with multi-
national firms able to shift production to wherever costs are
lowest, a firm
whose manufacturing operations are restricted to one country
cannot compete
unless costs in its home country happen to be low, a condition
that does not
F I N A N C I A L M A N AG E M E N T I N T H E N E W
M I L L E N N I U M
T A B L E 1 - 1
PERCENTAGE OF REVENUE PERCENTAGE OF NET
INCOME
COMPANY ORIGINATED OVERSEAS GENERATED
OVERSEAS
Chase Manhattan 23.9 21.9
Coca-Cola 61.2 65.1
Exxon Mobil 71.8 62.7
General Electric 31.7 22.8
General Motors 26.3 55.3
IBM 57.5 49.6
McDonald’s 61.6 60.9
Merck 21.6 43.4
Minn. Mining & Mfg. 52.1 27.2

Walt Disney 15.4 16.6
SOURCE: Forbes Magazine’s 1999 Ranking of the 100 Largest
U.S. Multinationals; Forbes, July 24, 2000,
335–338.
Percentage of Revenue and Net Income from Overseas
Operations
for 10 Well-Known Corporations
Check out http://
www.nummi.com/
home.htm to find out
more about New United
Motor Manufacturing, Inc.
(NUMMI), the joint venture between
Toyota and General Motors. Read about
NUMMI’s history and organizational
goals.
necessarily exist for many U.S. corporations. As a result of
these four factors,
survival requires that most manufacturers produce and sell
globally.
Service companies, including banks, advertising agencies, and
accounting
firms, are also being forced to “go global,” because these firms
can best serve their
multinational clients if they have worldwide operations. There

will, of course, al-
ways be some purely domestic companies, but the most dynamic
growth, and the
best employment opportunities, are often with companies that
operate worldwide.
Even businesses that operate exclusively in the United States
are not immune
to the effects of globalization. For example, the costs to a
homebuilder in rural
Nebraska are affected by interest rates and lumber prices —
both of which are de-
termined by worldwide supply and demand conditions.
Furthermore, demand for
the homebuilder’s houses is influenced by interest rates and also
by conditions in
the local farm economy, which depend to a large extent on
foreign demand for
wheat. To operate efficiently, the Nebraska builder must be able
to forecast the de-
mand for houses, and that demand depends on worldwide
events. So, at least some
knowledge of global economic conditions is important to
virtually everyone, not
just to those involved with businesses that operate
internationally.
INFORMATION TECHNOLOGY
As we advance into the new millennium, we will see continued
advances in com-
puter and communications technology, and this will continue to
revolutionize the
way financial decisions are made. Companies are linking
networks of personal

During the past 20 years, Coca-Cola has createdtremendous
value for its shareholders. A
$10,000 investment in Coke stock in January 1980 would have
grown to nearly $600,000 by mid-1998. A large part of that im-
pressive growth was due to Coke’s overseas expansion program.
Today nearly 75 percent of Coke’s profit comes from overseas,
and Coke sells roughly half of the world’s soft drinks.
More recently, Coke has discovered that there are also risks
when investing overseas. Indeed, between mid-1998 and Janu-
ary 2001, Coke’s stock fell by roughtly a third—which means
that the $600,000 stock investment decreased in value to
$400,000 in about 2.5 years. Coke’s poor performance during
this period was due in large part to troubles overseas. Weak
economic conditions in Brazil, Germany, Japan, Southeast Asia,
Venezuela, Colombia, and Russia, plus a quality scare in Bel-
gium and France, hurt the company’s bottom line.
Despite its recent difficulties, Coke remains committed to its
global vision. Coke is also striving to learn from these difficul-
ties. The company’s leaders have acknowledged that Coke may
have become overly centralized. Centralized control enabled
Coke
to standardize quality and to capture operating efficiencies, both
of which initially helped to establish its brand name throughout
the world. More recently, however, Coke has become concerned
that too much centralized control has made it slow to respond to
changing circumstances and insensitive to differences among
the various local markets it serves.
Coke’s CEO, Douglas N. Daft, reflected these concerns in a re-
cent editorial that was published in the March 27, 2000, edi-
tion of Financial Times. Daft’s concluding comments appear
below:

So overall, we will draw on a long-standing belief that Coca-
Cola always flourishes when our people are allowed to use
their insight to build the business in ways best suited to
their local culture and business conditions.
We will, of course, maintain clear order. Our small corpo-
rate team will communicate explicitly the clear strategy, pol-
icy, values, and quality standards needed to keep us cohe-
sive and efficient. But just as important, we will also make
sure we stay out of the way of our local people and let them
do their jobs. That will enhance significantly our ability to
unlock growth opportunities, which will enable us to consis-
tently meet our growth expectations.
In our recent past, we succeeded because we understood
and appealed to global commonalties. In our future, we’ll
succeed because we will also understand and appeal to local
differences. The 21st century demands nothing less.
COKE RIDES THE GLOBAL ECONOMY WAVE
For more information
about the Coca-Cola
Company, go to
http://www.thecoca-
colacompany.com/world/
index.html, where you can find profiles
of Coca-Cola’s presence in foreign
countries. You may follow additional
links to Coca-Cola web sites in foreign
countries.
9F I N A N C I A L M A N AG E M E N T I N T H E N E W

M I L L E N N I U M
eTOYS TAKES ON TOYS “ ” USR
The toy market illustrates how electronic commerce is chang-
ing the way firms operate. Over the past decade, this market
has been dominated by Toys “ ” Us, although Toys “ ” Us has
faced increasing competition from retail chains such as Wal-
Mart, Kmart, and Target. Then, in 1997, Internet startup eToys
Inc. began selling and distributing toys through the Internet.
When eToys first emerged, many analysts believed that the
Internet provided toy retailers with a sensational opportunity.
This point was made amazingly clear in May 1999 when eToys
issued stock to the public in an initial public offering (IPO).
The stock immediately rose from its $20 offering price to $76
per share, and the company’s market capitalization (calculated
by multiplying stock price by the number of shares outstanding)
was a mind-blowing $7.8 billion.
To put this valuation in perspective, eToys’ market value at
the time of the offering ($7.8 billion) was 35 percent greater
than that of Toys “ ” Us ($5.7 billion). eToys’ valuation was
particularly startling given that the company had yet to earn a
profit. (It lost $73 million in the year ending March 1999.)
Moreover, while Toys “ ” Us had nearly 1,500 stores and rev-
enues in excess of $11 billion, eToys had no stores and rev-
enues of less than $35 million.
Investors were clearly expecting that an increasing number
of toys will be bought over the Internet. One analyst esti-
mated at the time of the offering that eToys would be worth
$10 billion within a decade. His analysis assumed that in 10
years the toy market would total $75 billion, with $20 billion
R

R
RR
coming from online sales. Indeed, online sales do appear to
be here to stay. For many customers, online shopping is
quicker and more convenient, particularly for working parents
of young children, who purchase the lion’s share of toys. From
the company’s perspective, Internet commerce has a number
of other advantages. The costs of maintaining a web site and
distributing toys online may be smaller than the costs of
maintaining and managing 1,500 retail stores.
Not surprisingly, Toys “ ” Us did not sit idly by — it re-
cently announced plans to invest $64 million in a separate on-
line subsidiary, Toysrus.com. The company also announced an
online partnership with Internet retailer Amazon.com. In addi-
tion, Toys “ ” Us is redoubling its efforts to make traditional
store shopping more enjoyable and less frustrating.
While the Internet provides toy companies with new and in-
teresting opportunities, these companies also face tremendous
risks as they try to respond to the changing technology. In-
deed, in the months following eToys’ IPO, Toys “ ” Us’ stock
fell
sharply, and by January 2000, its market value was only slightly
above $2 billion. Since then, Toys “ ” Us stock has rebounded,
and its market capitalization was once again approaching $5 bil-
lion. The shareholders of eToys were less fortunate. Concerns
about inventory management during the 1999 holiday season
and the collapse of many Internet stocks spurred a tremendous
collapse in eToys’ stock — its stock fell from a post–IPO high
of $76 a share to $0.31 a share in January 2001. Two months
later, eToys declared bankruptcy.

R
R
R
R
computers to one another, to the firms’ own mainframe
computers, to the Inter-
net and the World Wide Web, and to their customers’ and
suppliers’ computers.
Thus, financial managers are increasingly able to share
information and to have
“face-to-face” meetings with distant colleagues through video
teleconferencing.
The ability to access and analyze data on a real-time basis also
means that quan-
titative analysis is becoming more important, and “gut feel” less
sufficient, in
business decisions. As a result, the next generation of financial
managers will need
stronger computer and quantitative skills than were required in
the past.
Changing technology provides both opportunities and threats.
Improved
technology enables businesses to reduce costs and expand
markets. At the same
time, however, changing technology can introduce additional
competition,
which may reduce profitability in existing markets.
The banking industry provides a good example of the double-
edged technol-
ogy sword. Improved technology has allowed banks to process

information
much more efficiently, which reduces the costs of processing
checks, providing
credit, and identifying bad credit risks. Technology has also
allowed banks to
serve customers better. For example, today bank customers use
automatic teller
machines (ATMs) everywhere, from the supermarket to the local
mall. Today,
many banks also offer products that allow their customers to use
the Internet to
manage their accounts and to pay bills. However, changing
technology also
threatens banks’ profitability. Many customers no longer feel
compelled to use a
local bank, and the Internet allows them to shop worldwide for
the best deposit
and loan rates. An even greater threat is the continued
development of elec-
tronic commerce. Electronic commerce allows customers and
businesses to
transact directly, thus reducing the need for intermediaries such
as commercial
banks. In the years ahead, financial managers will have to
continue to keep
abreast of technological developments, and they must be
prepared to adapt their
businesses to the changing environment.
SELF-TEST QUESTIONS

What two key trends are becoming increasingly important in
financial man-
agement today?
How has financial management changed from the early 1900s to
the present?
How might a person become better prepared for a career in
financial man-
agement?
T H E F I N A N C I A L S TA F F ’ S R E S P O N S I B I L
I T I E S
The financial staff’s task is to acquire and then help operate
resources so as to
maximize the value of the firm. Here are some specific
activities:
1. Forecasting and planning. The financial staff must coordinate
the plan-
ning process. This means they must interact with people from
other de-
partments as they look ahead and lay the plans that will shape
the firm’s
future.
2. Major investment and financing decisions. A successful firm
usually
has rapid growth in sales, which requires investments in plant,
equip-
ment, and inventory. The financial staff must help determine the
optimal
sales growth rate, help decide what specific assets to acquire,
and then

choose the best way to finance those assets. For example,
should the firm
finance with debt, equity, or some combination of the two, and
if debt is
used, how much should be long term and how much short term?
3. Coordination and control. The financial staff must interact
with other
personnel to ensure that the firm is operated as efficiently as
possible. All
business decisions have financial implications, and all managers
— finan-
cial and otherwise — need to take this into account. For
example, mar-
keting decisions affect sales growth, which in turn influences
investment
requirements. Thus, marketing decision makers must take
account of
how their actions affect and are affected by such factors as the
availability
of funds, inventory policies, and plant capacity utilization.
4. Dealing with the financial markets. The financial staff must
deal with
the money and capital markets. As we shall see in Chapter 5,
each firm af-
fects and is affected by the general financial markets where
funds are
11A LT E R N AT I V E F O R M S O F B U S I N E S S O R
GA N I Z AT I O N
SELF-TEST QUESTION

What are some specific activities with which a firm’s finance
staff is involved?
raised, where the firm’s securities are traded, and where
investors either
make or lose money.
5. Risk management. All businesses face risks, including natural
disasters
such as fires and floods, uncertainties in commodity and
security mar-
kets, volatile interest rates, and fluctuating foreign exchange
rates.
However, many of these risks can be reduced by purchasing
insurance
or by hedging in the derivatives markets. The financial staff is
respon-
sible for the firm’s overall risk management program, including
identi-
fying the risks that should be managed and then managing them
in the
most efficient manner.
In summary, people working in financial management make
decisions regarding
which assets their firms should acquire, how those assets should
be financed,
and how the firm should conduct its operations. If these
responsibilities are per-
formed optimally, financial managers will help to maximize the
values of their
firms, and this will also contribute to the welfare of consumers
and employees.
Sole Proprietorship
An unincorporated business

owned by one individual.
A LT E R N AT I V E F O R M S
O F B U S I N E S S O R GA N I Z AT I O N
There are three main forms of business organization: (1) sole
proprietorships,
(2) partnerships, and (3) corporations, plus several hybrid
forms. In terms of
numbers, about 80 percent of …
Running head: FOUR FINANCIAL MANAGEMENT OF
UNDER ARMOUR 1
FOUR FINANCIAL MANAGEMENT OF UNDER ARMOUR 2
Four Financial Management of Under Armour
Name
Institutional Affiliation
Financial Management

SWOT Analysis
Strengths
· Product innovation
· Automation of activities
· Strong dealer community
· Strong brand portfolio
· Strong free cash flow
· Good returns of capital expenditure
· Highly skilled workforce
Weaknesses
· Limited success outside the core business
· Inadequate investment in new technologies
· Poor marketing strategies
· Insufficient in research and development
· Disruptions in the supply chains
· Low current ratio
Opportunities
· New environment policies
· New customers from online channels
· Opening new markets
· Low rates of inflation
· Diversification of its production
Threats
· Irregular supply of innovative products
· Liability laws in some countries
· New technologies developed by competitors
· Low-quality products
· High levels of competition
Introduction
Business organizations operate in a highly competitive market
that requires an effective strategic plan coupled with active
financial management. The presence of many companies and

organizations has led to a substantial increase in cash flow in
the market. The money pumped into the market by big firms and
proceeds of their products is responsible for the increased flow
of capital in the market (Admin, 2019). The increased entry of
new firms into the market, however, puts the lives of companies
in danger due to the high level of competition over a few
customers. To reduce such effects, companies must practice
effective financial management. Under Armour, therefore, needs
to establish sound financial management practices. Under
Armour, Inc. is an American company that specializes in the
production of sports, footwear, and casual apparel. Baltimore,
Maryland, is where the company's headquarters resides. (Admin,
2019). The company uses new technology in its production
resulting in the production of high-quality products.
Over the years, Under Armour has diversified its
production to cater to women, men, and children. Offering
products for people across all ages has tremendously increased
its sales volume. The company operates under the mission; "To
make all athletes better through passion, design and the
relentless pursuit of innovation" (Admin, 2019). However, it
was in 2006 when the company went public, thus making it
possible to acquire stock value. Through the effective
leadership and innovative nature of its employees, the company
has experienced high levels of growth. Nevertheless, some
factors such as; free entry into the market, high level of
competition, the existence of substitute products in the market
and high bargaining powers of both suppliers and consumers
have led to inflation thereby prompting the need for effective
financial management practices (Higgins & Reimers, 1995).
Financial management can be defined as the process of
planning, directing, organizing, as well as controlling all
financial transactions and activities such as the use of funds
within an organization and procurement (Higgins & Reimers,
1995). General management principles guide it to the financial
resources of an enterprise. To have sufficient financial
management in Under Armour Company, the organization

requires effective policies supported by a mission. The
company, therefore, needs to establish effective policies and a
mission statement. Under Armour should also get local and
international acceptance to guarantee a good market for the
products. In sustainable strategy management, the company is
supposed to follow the right steps that lead to competitive
advantages.
Stages Followed In Financial Management
Determining the current financial situation
At this stage of financial management, company
leaders should establish the current financial position of the
company with regards to; debts, incomes, living expenses, and
savings. The company can get the exact current economic
situation of the company by preparing a list of existing
indebtedness and asset balances, as well as the amounts of
money spent on various items.
Developing financial goals
The second step in financial management involves
conducting analysis aimed at differentiating needs from wants.
Setting specific financial goals is imperative in financial
management since the business will make its budget depending
on the set financial goals besides channeling resources towards
the achievement of such goals (Admin, 2019). The process
further helps the organization in prioritizing the objectives at
the expense of other activities.
Identifying alternative courses of action
The creation of an alternative course of action is
essential in financial management. Several factors, however,
influence the alternative course of action. Probable courses of
action fall under the following categories; changing the current
situation, expanding the current session, taking a new course of
action, or continuing the same course of action (Admin, 2019).
Developing alternative courses of action helps a company by
ensuring that options to a problem are always available. The
board of directors and other stakeholders must be highly

involved in this process.
Evaluating alternatives
Upon developing the alternative course of action, the
shareholders must jointly evaluate the alternative when taking
into consideration the company's current ratio, acid test,
financial situation as well as current economic situations
(Admin, 2019). Decision making will, however, be an ongoing
process to minimize mistakes. Additionally, the management
body must conduct a risk evaluation.
Creating and implementing a financial action plan
At this stage, the organization develops an action plan
that requires choosing how to achieve the goals. The actions
taken must be able to make both short and long-term projects.
Implementing a financial action plan, however, requires a joint
effort from all personnel in a company (Admin, 2019). Before
decision making occurs, comprehensive consultation must take
place.
Reevaluating and revising the plan
When taking a particular action on a plan, the
financial management process does not end. The administration
must, therefore, be committed to revising the strategy to ensure
corrections include current events in the market. The
reevaluation process might prompt the changing of social,
economic, and political factors to aid in achieving the
company's goals.
Recommendations
In the bid to improve on its services, the company
should increase its working capital and consequently invest in
new technology. It should thus take full advantage of e-
commerce by using different internet aided services. The use of
social media will increase the company floor of operations
hence growing its profit margin (Salgado, 2017). Improving the
level of interaction with the customers is one main advantage
that will accrue to the company when it uses social media, and
interned aided platform. Introduction and subsequent use of

different social media outlets would be geared towards
introducing the company's products and services to its new and
prospective customers, thereby enabling it access the market
quickly (Salgado, 2017). Through social media, customers will
easily access the company hence faster communication and
customer service delivery. The social media platforms will
further increase the company's sales volume. Customers can
make inquiries about products and services and consequently
making payments through online payment services. After
establishing online purchases, the goods can then be delivered
to the customers' premises (Salgado, 2017). The use of social
media offers a significant opportunity for the company to
promote its products and services as well as acquiring more
customers.
Porter’s Five Forces Model
After conducting a SWOT analysis, the company needs to
deploy the use of Porter’s five forces model. Porter's Five
Forces Model offers an organization the freedom to consider
critical forces affecting them. Through this tool, the company
will get an opportunity to highlight strengths promoting its
success as well as those limiting the chances of the company’s
progress. Through the model, the company will get an
opportunity to identify the forces to deal with before getting
into the market (Brett, 2018). Forces such as competitors, the
risks associated with the introduction of new products into the
market, buyers buying power as well as their bargaining power
will be determined; hence the company will be able to project
the quantity to purchase. The model will also help the company
in establishing the bargaining power of suppliers based on their
uniqueness, prices, and quality of their products. Porter's five
forces model will guarantee that the company offers similar
products that cannot be imitated by rivals (Brett, 2018). That
ensures the company maintains its brandand serve loyal
customers.
Technological Advancements

In recent years, Under Armour has introduced different
better designs, shoes, as well as other products thanks to its use
of advanced technology. Through the adoption of advanced
technology, the company has increased the quality of its
products, which allowed the company to maintain its flexibility
as demand increases, taste, and preference of the customers'
change. Under Armour can use this chance to create inventions
that will be more attractive to the customers and ensure a
broader market (Salgado, 2017). The old designs can be
improved to cope with the competition.
Access to new markets
Getting entry into new markets is often the priority of every
organization. Entry into new markets often increases the floor
of operations, therefore, adding more customers. Under
Armour's management should, thus, establish a strong and
workable strategic plan that would help it gain access to new
markets. Despite being dominant in the United States, the
company should venture into other countries by opening up
offices in such countries. Through entering into new countries,
the company will be able to make more profits, thus increasing
its financial strength. Moreover, expanding the floor of
operations aid in reducing the intensity of competition since it
will acquire more customers than it loses to the competitors
(Salgado, 2017). The company should, therefore, expand the
scope of its operations.
Conclusion
In conclusion, financial management plays a
fundamental role in instituting ways through which Under
Armours Company can compete efficiently in the market.
Consequently, Under Armour should observe the central
competencies to increase the sales volume, thereby winning
over more customers. The organization has more strengths and
opportunities that it can use to compote favorably. The benefits
of the company’s disposals should be used to its competitive
advantage to counterbalance threats and faults posed by other

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