Corporate Finance
Corporate finance:
Corporate finance is an area of finance dealing with the financial
decisions corporations make and the tools and analysis used to make
these decisions. The primary goal of corporate finance is to maximize
corporate value while managing the firm's financial risks. Although it is in
principle different from managerial finance which studies the financial
decisions of all firms, rather than corporations alone, the main concepts
in the study of corporate finance are applicable to the financial
problems of all kinds of firms.
The discipline can be divided into long-term and short-term decisions and
techniques. Capital investment decisions are long-term choices about
which projects receive investment, whether to finance that investment
with equity or debt, and when or whether to pay dividends to
shareholders. On the other hand, the short term decisions can be
grouped under the heading "Working capital management". This subject
deals with the short-term balance of current assets and current
liabilities; the focus here is on managing cash, inventories, and short-
term borrowing and lending (such as the terms on credit extended to
customers).
The terms Corporate finance and Corporate financier are also
associated with investment banking. The typical role of an investment
banker is to evaluate company's financial needs and raise the
appropriate type of capital that best fits those needs.
The financing decision:
Achieving the goals of corporate finance requires that any corporate
investment be financed appropriately. As above, since both hurdle rate
and cash flows (and hence the riskiness of the firm) will be affected,
the financing mix can impact the valuation. Management must therefore
identify the "optimal mix" of financing—the capital structure that
results in maximum value. (See Balance sheet, WACC, Fisher separation
theorem; but, see also
Corporate finance is an area of finance dealing with the financial
decisions corporations make and the tools and analysis used to make
these decisions. The primary goal of corporate finance is to maximize
corporate value while managing the firm's financial risks. Although it is in
principle different from managerial finance which studies the financial
decisions of all firms, rather than corporations alone, the main concepts
in the study of corporate finance are applicable to the financial
problems of all kinds of firms.
The discipline can be divided into long-term and short-term decisions and
techniques. Capital investment decisions are long-term choices about
which projects receive investment, whether to finance that investment
with equity or debt, and when or whether to pay dividends to
shareholders. On the other hand, the short term decisions can be
grouped under the heading "Working capital management". This subject
deals with the short-term balance of current assets and current
liabilities; the focus here is on managing cash, inventories, and short-
term borrowing and lending (such as the terms on credit extended to
customers).
The terms Corporate finance and Corporate financier are also
associated with investment banking. The typical role of an investment
banker is to evaluate company's financial needs and raise the
appropriate type of capital that best fits those needs.
The financing decision:
Achieving the goals of corporate finance requires that any corporate
investment be financed appropriately. As above, since both hurdle rate
and cash flows (and hence the riskiness of the firm) will be affected,
the financing mix can impact the valuation. Management must therefore
identify the "optimal mix" of financing—the capital structure that
results in maximum value. (See Balance sheet, WACC, Fisher separation
theorem; but, see also