Corporate finance is still continually evolving since the beginning of the 20th century. It is an extensive branch of finance; therefore, the techniques, methods and content of this subject have been changing. Especially with the advancement in international trading, new investment avenues, and financing practices, this subject has been an integral one in the domain of finance. This book “Fundamentals of Corporate Finance 3rd Edition, covers all the main areas of corporate finance and its management.
- At the core of corporate finance is the discussion of how the company achieves its objectives, and precisely the financial objective of maximization of shareholder wealth. The very first is the allocation and use of financial resources for real capital investment, for example, product expansion, land and buildings, and plant and equipment
- Capital structure is another important part of corporate finance, as in the financing arrangements govern how the value of the firm is divided. The people or institutions that buy debt from (i.e. lend money to) the firm are called creditors, bondholders or debt holders. Moreover, the holders of the equity shares are termed as shareholders.
- The Financial Manager plays an integral role in the world of finance. In large firms, the finance activity is typically linked with a top officer of the firm, for example, the vice-president or chief financial officer. Usually, for the reporting purpose, there is chief financial officer are the treasurer as well as the controller. Importantly the treasurer is accountable for managing cash flows, supervision of the capital expenditure decisions and making financial plans.
- Net working capital is defined as current assets minus current liabilities. From a financial standpoint, all the short-term cash flow hitches come from the mismatching of cash inflows and outflows. This is the subject of short-term finance.
- Another important concept of corporate finance that you need to learn is the Book vs. Market Values. The Book values of debt and equity are based on historical values. Though for capital budgeting decisions, we need to be concerned with raising money now and not the historical cost, so it is better to look at the current the cost of values of the sources of capital. To do this, it’s ideal to look at what the capital sells for in the market.
There are other key concepts such as the cost of debt, cost of retained earnings, the Cost of Equity, the net present value, leverage, bankruptcy cost, trade-off theories, dividends, return on investment and return of earnings that are widely discussed for the ease of the learners in this book i.e. Fundamentals of Corporate Finance 3rd Edition. Concerned about the benefits of corporate finance regarding business growth? Hurry up and Learn more here.