Running head: WORLDVIEW OF CORPORATE FINANCE

Worldview of Corporate Finance John Allen Davis, III and Audrey Dodson Liberty University March 3, 2013

WORLDVIEW OF CORPORATE FINANCE Worldview of Corporate Finance Every decision made in a business has financial implications. These decisions involve

the use of money and fall under the heading corporate finance. Corporate management makes decisions on investing resources wisely, raising capital to fund investments, and increasing the original investments of shareholders. Management is in essence responsible for maximizing the value of the business. While the objective of management is to maximize the value of the business, consideration should be given to all stakeholders. Corporations have a responsibility to stakeholders that can be affected by the companys business operations. Stakeholders include employees, suppliers, customers, communities, and shareholders. Corporate responsibility includes honesty, integrity, and respect for others (Brealey, Myers, & Marcus, 2012). Internally corporate responsibility is ensuring that internal controls are effective and efficient, and that the data gathered from all activities of the company is accurate and reliable. Internal controls also ensure that resources are being used wisely, and that checks and balances are in place to monitor and measure cash flow (Hagerman, 1980). 2 Chronicles 24:11-12 states: When the chest was taken to the royal office of control, run by the Levites, they would check the amount of money in it, then the kings secretary would come with a representative of the chief priest; they would take up the chest and carry it away. The implication of these verses is that there should be proper accounting of funds coming in and going out; and the individuals handling funds should be honest and trustworthy men or women. Corporate finance is charged with the responsibility of investing the funds of investors and shareholders wisely to receive a return on capital in excess of the cost of capital. In 2 Corinthians 8:21 Paul states, For we are taking pains to do what is right, not only in the eyes of the Lord but also of men (The HarperCollins Study Bible, 2006). In this verse, Paul vouches

WORLDVIEW OF CORPORATE FINANCE for the character of Titus and two other men who are traveling to Corinth to help with the collection of funds. Paul reassures the Corinthians that he and the men are honest and

trustworthy; therefore, they can be trusted with the funds. This verse supports honesty, integrity and transparency in business dealings. It is also relevant to corporate finance because it shows that man is not only accountable to God; man is also accountable to and for each other. It is stated in Proverbs 10:4 that He becometh poor that dealeth with a slack hand (The HarperCollins Study Bible, 2006). It is important for corporate management to make sure that all operations and financial decisions are done with integrity and honesty. The honesty and integrity of corporate management helps reduce or alleviate the potentiality of fraud and attests to the accuracy and reliability of the companys financial statements. Thus, those interested in investing in the company have a clear picture of the corporate structure of the company and its value. Corporate finance is about doing what is best for a company, making wise financial decisions and considering all stakeholders in the course of operating the business. Corporate culture or governance sets the tone for how the company conducts business (Williamson, 1988). The Bible is not only a guide for an individuals personal life; it is relevant for all aspects of life, business and personal. Corporate finance, therefore; has the responsibility for planning, for discipline, for stewardship, and for working. The responsibility for planning should be based on biblical values, goals, and priorities. The Bible warns about an individuals attitude toward money and material possessions. Financial planning is an enabler of good stewardship and helps to overcome temptation of earthly treasures. Corporate finance should be dependent on direction from God verses being dependent on their own strategies. Financial planning, just like godliness, requires discipline and

WORLDVIEW OF CORPORATE FINANCE commitment in order for objectives or plans to be achieved. The responsibility of good

stewardship comes from taking in consideration that everything an individual is and has belongs to God. All should be invested for the glory of God and His kingdom. Working is Gods way of providing for our needs. By working, we provide for our family and for ourselves. As an individual works, he should keep in mind and heart that God is our real Boss. So our work should reflect our relationship with God. We love God, and daily strive to obey and please Him. Ecclesiastes 9:10: Whatever your hand finds to do, do it with all of your might implies that we must do the best that we can with the gifts, abilities, and skills God has given us. Corporate finance is in a stewardship position of looking after someone elses property and knows the rate of return the property owner expects for use of his funds. They must utilize money, time, skills, and talents to handle all resources, effectively and efficiently, to maximize the value of the firm. Therefore; corporate finance must have goals, plans to achieve those goals, and systems to monitor investment funds and financing funds. The keys to achieving the goals of the company are found in the following scriptures: Psalm 24:1-25 The earth is the Lords and everything in it, the world, and all who live in it; for he founded it upon the seas and established it upon the waters. Hebrews 13:5 Keep your lives free from the love of money and be content with what you have, because God has said, Never will I leave you; never will I forsake you. Matthew 6:33 But seek first his kingdom and his righteousness, and all these things will be given unto you as well. The principles garnered from these verses are, first and foremost, any money invested or financed does not belong to corporate finance or the investors/shareholders, it belongs to God. God owns everything. To not conform to the dictates of society, whereby allowing a division

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between you and God. To obey and honor God first and your needs will be met. As a steward of the company, corporate finance places the long-term best interests of a group ahead of its individual self interests and makes a concerted effort to consider all stakeholders, internally and externally (Hernandez, 2008).

WORLDVIEW OF CORPORATE FINANCE References Baker, R., Lembke, V., King, T., & Jeffrey, C. (2009). Advanced financial accounting (8 ed.). New York: McGraw-Hill/Irwin. Brealey, R., Myers, S., & Marcus, J. (2012). Fundamentals of corporate finance (7th ed.). New York, NY: McGraw-Hill/Irwin. Hagerman, R. (1980). Accounting in the Bible. The Accounting Historians Journal, 7(2), 71-76. Retrieved from http://www.jstor.org/stable/40697656 Hernandez, M. (2008). Promoting stewardship behavior in organizations: A leadership model. Journal of Business Ethics, 80(1), 121-128. doi:http://dx.doi.org/10.1007/s10551-0079440-2 The HarperCollins Study Bible. (2006). New York: HarperCollins Publishers. Williamson, O. (1988). Corporate finance and corporate governance. The Journal of Finance, 43(3), 567-591. Retrieved from http://www.jstor.org/stable/2328184