Corporate Finance
What is Corporate Finance?
Corporate Finance is the function of managing a firm’s limited funds, where the decisions like as invest the raised fund, financing decisions, and pay the dividend are made in such a way so that the shareholder wealth is maximized.
What are the Key Components of Corporate Finance?
The basic parts of finance discipline involves capital budgeting, capital structure, cost of capital, dividend policy, financial planning and analysis, working capital management, risk management, mergers and acquisitions, corporate governance and financial reporting/compliance.
What is Capital Budgeting?
The capital budgeting process involves the comparing and evaluation of projects that aim to provide returns for the company and mostly, this is achieved by using financial methods like Net Present Value (NPV), Internal Rate of Return (IRR) and the Payback Period.
How is Capital Structure Determined?
Capital structure designation is a combination of debt and equity capital resources applied by a company. The debt to equity ratio is a numeric measure, which is calculated by subtracting equity from funded debt. This is the ratio having bearing on the benefits and costs of debt and equity considering factors like risk profile, cost of capital, and financial flexibility.
What is the Cost of Capital?
The cost of capital is the average cost of funds, in which the funding mix is weighted. For example, the sources of funds can be equity finance or debt. It is the return minimum investors’ and is used to evaluate prospect investments and financing decisions weight.