Introduction to Corporate Finance


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Corporate finance is the area of finance dealing with the sources of funding and the capital structure of corporations and the actions that managers take to increase the value of the firm to the shareholders, as well as the tools and analysis used to allocate financial resources. The primary goal of corporate finance is to maximize shareholder value. Although it is in principle different from managerial finance which studies the financial management 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.

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Introduction to Corporate Finance

  1. 1. Introduction to Corporate Finance Session One
  2. 2. Corporate Finance • Text book: Fundamentals of Corporate Finance by Brealey, Myers, Marcus • Reference book: Corporate Financial Management by Douglas R. Emery & John D. Finnerty
  3. 3. Corporate Finance Activity Marks Duration Frequency Selection Weight age Quiz 10 Max. 15 minutes Three Best 2 10% Assignment 10 Two weeks Two Best 1 10% Hourly Exam 20 75 Minutes Two Best 1 20% Report/Presentation 10 N/A One One 10% Final 50 3 hours One One 50%
  4. 4. Course Outline Introduction Value Special Topics & Investment Debt & Pay out Policy Risk Financing
  5. 5. What is Corporate Finance ? Corporate Finance is to oversee the financial activities of a company. It is primarily concerned with maximizing shareholder value through longterm and short-term financial planning and the implementation of various strategies. Everything from capital investment decisions to investment banking falls under the domain of corporate finance.
  6. 6. The Role of The Financial Manager • Capital Budgeting Decision – Decision to invest in various assets. • …also called the Investment Decision
  7. 7. The Role of The Financial Manager • Financing Decision – The form and amount of financing of a firm’s investments. • Capital Structure – The mix of long term debt and equity financing.
  8. 8. The Role of The Financial Manager (2) (1) Firm's Financial operations Manager Real assets (4a) (4b) (3) (1) Cash raised from investors (2) Cash invested in firm (3) Cash generated by operations (4a) Cash reinvested (4b) Cash returned to investors Investors (stockholders/ debtholders save and invest in a firm.
  9. 9. Who is The Financial Manager? Chief Financial Officer Treasurer Controller
  10. 10. Who is The Financial Manager? • Chief Financial Officer (CFO) – Oversees the treasurer and controller and sets overall financial strategy. • Treasurer – Responsible for financing, cash management, and relationships with banks and other financial institutions. • Controller – Responsible for budgeting, accounting, and taxes.
  11. 11. Thank you