Corporate finance

-Darshana Shah

Types of Finance

Finance questions
Specific questions addressed by finance:

1. How should funds be acquired?

2. How should funds be spent? 3. How should short-term assets/liabilities be managed?

Finance Questions in a Corporate Context (i.e. corporate finance)

1. Where will you get the long-term financing to invest? Bring in other owners (issue equity/stocks) Borrow (issue debt/bonds) What long-term investments should be undertaken Buildings Machinery Equipment Research and development (R&D) How will you manage the companys short-term cash flow? Collecting from customers paying suppliers

2.

3.

Corporate Finance
It is the task of providing the funds for a corporations activities. A business activity concerned with planning, raising, investing & monitoring funds in order to achieve the financial objectives of a corporate. Acquisition and allocation of a corporation's funds or resources, with the goal of maximizing shareholder wealth (i.e., stock value)

Features
Acquisition & application of funds Achieve certain objectives Purpose of finance Interface with other functional areas Smooth functioning Art Science Availabilty of finance Planning and control

Need & Importance

Feasibility study Promoting a company Fixed assets Working capital Growth Taxes & duties Modernization Promotional & advertising purpose Repay loan installment Dividend payment Donations Winding up stage

Objectives/ goals of financial management

Maximising sales/ revenue/ earnings Maximising profit Maximising return on sale/ investment Maximising corporate wealth Maximising shareholder value

Social acceptability and recognition

Maximising social wealth

Role of Financial Manager / CFO

Acts as representative of shareholder. All decisions, he takes should have only one aim of shareholder's wealth maximization. Decides in which assets to invest also called as capital budgeting decision Decides where to raise money from also called as financing decision Help in day-to-day liquidity management - also called as Working Capital management Decides how much dividend to give to shareholders.

CFO

Treasurer
Cash Management, Raising Capital, Banking Relationships

Controller
Preparing financial statements Accounting Taxes

Interface of finance function with other functions

Production
R&D Marketing

Human resources

Finance

Advertising

Customer care & after sale service Purchase

Accounting

The Three Major Decisions in Corporate Finance

The Investment decision Capital budgeting The Financing decision Issue of shares, debentures etc. The Dividend decision Dividend & retained earnings