This document provides an introduction to corporate finance. It discusses key topics including the meaning of corporate finance, the importance of corporate finance for business success, capital requirements including fixed and working capital, and components of capital structure. The summary is: Corporate finance deals with how corporations raise and use capital. It discusses the acquisition and use of capital by businesses. Corporate finance is important for business success as it helps with decision making, raising capital for projects, research and development, smooth business operations, and managing risk. Capital requirements include fixed capital for long-term assets and working capital for day-to-day operations. The capital structure refers to the mix of different sources of funding such as equity, preference shares, debt, and

1. REVISE LAST YEAR
 Secretary
 Joint Stock Company
 Formation of Company,Documrnts required
 Members of Company
 Directors & Key Managerial persons
 Company Meeting
 Correspondence with Director, Bank &
Statutory Authority

2. 1. INTRODUCTION
TO
CORPORATE
FINANC
By –
Mrs.Shital Nabariya
(Aurangabad ,Maharashtra)

3. YOU WANT TO START A BUSINESS THEN WHAT
YOU WANT FIRSTLY?

4. Money.
So ,is it easy to collect Money ?

5. So, the term Finance is related with Money &
Money Management.
Inflow Money
Outflow
Success of any business organization depends
upon the efficiency with which it is able to
generate and use funds.

6. “Money is an arm or leg – use it or lose it.”
- Henry Ford
What you understand from it ?
It clearly indicates the importance of Finance for
the success of business.

7. Corporate Finance :
We know the meaning of Finance but
what about Corporate?
• Corporate means shared by a whole
group and not just of a single member.
• Meaning :
“Corporate Finance deals primarily with
the acquisition & use of capital by business
corporation.”
- acquisition of capital
- Use of Capital

8. It also includes :-
-Financial planning
- study of capital market( place where securities are bought &
sale)
- share market
- money market ( short term debt investment e.g.
Mutual Fund)
Financial organizations & Bank plays vital role in
corporate finance.
Basis of corporate Finance
Financing Decision Investment
Decision

9. The Financial Manager plays Very important role.
1) Financing Decision :
The firm has multiple choices of sources of
financing. The financial manager insures that
the firm is well capitalized & the firm has right
combination of debt & equity capital.
2) Investment Decision :
The finance manager has to take the
decision regarding the use of fund
systematically that it brings max. returns. for
this it has to take into consideration the cost
of capital.
From the above discussion what we understand?

10. Corporate finance plays very important role for the
success of the business.
So tomorrow we are going to see its Importance.
Before concluding lets revise it-
-Finance
- Corporate
- Corporate Finance
- Basis of Corporate Finance
- Financing Decision & Investment Decision

11. * IMPORTANCE OF CORPORATE FINANCE :
1) Helps in Decision Making : Decisions are taken
keeping in view of it’s impact on profitability. Availability of
Fund.
2) Helps in Raising Capital for a Project
3) Helps in Research & Development
4) Helps in Smooth Running of Business Firm
5) Bring co-ordination between Various Activities
6) Promotes Expansion & Diversification
( provides money to purchase modern machines &
technology )
7) Managing Risk
( Provision for sudden risk)
8) Replace Old Assets
9) Payment of Dividend & Interest
10) Payment of Taxes/ Fees

12. CAPITAL REQUIREMENTS
(FINANCIAL PLAN REFERS TO ASSESSMENT OF
FINANCIAL REQUIREMENT & ARRANGEMENT
SOURCES OF CAPITAL)
Capital
Fixed Capital Working
Capital
(It is the capital which is used ( It is the capital which is
for buying fixed assets ,used used to carry out the day
to
For longer period & not for day business activities.)
Resale purpose.)

13. Fixed Capital :
Such capital is require at the time of establishment or at
the time of expansion of business.
Factors affecting Fixed Capital Requirement :-
1)Nature of Business :
Manufacturing Industries & Public utilities have to
invest huge amount of fund FC.Trding business may
not need it.
2) Size of Business :
Large Scale
3) Scope of Business :
4) Extent of Lease or Rent :
5) Arrangement of Sub- contract :
e.g. Assemble parts

14. 6) Acquisition of old Assets :
7) Acquisition of assets on concessional rate
8) International Conditions
9) Trend in Economy
10) Population Trend:
Population opportunity to expand
11) Consumer Preferences
12) Competitive Factor :
If competitor shift to automation then other also
expand.

15. Working Capital:
Working Capital is the Capital which is used to carryout
day to day business activities . It is not possible to collect cash
immediately from Debtors & firm need capital to run smoothly.
Firm need working capital for :
• For building up inventories.
• For financing receivables
• To pay overheads ( indirect expenses)
• For covering day – to –day operating expenses
Working capital defined as “capital invested in current
assets.” Here current assets are those assets, which can be
converted into cash within a short period of time and the cash
received is again invested into these assets. Thus, it is constantly
receiving or circulating. Hence, working capital is also known as
circulating capital or Floating Capital .

16. Raw
Material
WIP
Finished
Product
Sales
Cash
Cycle flow of Working Capital :-
A part of cash may be used to pay creditors, income tax &
declared dividend & rest of it out into circulation again.

17. Factors affecting Working Capital Requirement:
(1) Nature of Business
(2) Scale of Operations:
(3) Business Cycle:
(4) Seasonal Factors:
Products demanded whole year – WC
Seasonal demanded in season only but produce whole year so WC
(5) Production Cycle:
Production cycle means the time involved in converting raw
material into finished product.
(7) Credit Allowed:
(6) Credit Availed:

18. (8) Operating Efficiency:
Operating efficiency means efficiently completing the
various business operations. Operating efficiency of every
organization happens to be different.
(9) Availability of Raw Material:
(10) Level of Competition:
(11) Inflation :
Inflation means rise in prices. In such a situation more
capital is required than before in order to maintain the previous
scale of production and sales.

19. The term ‘structure’ means the arrangement of the
various parts.
So capital structure means the arrangement of capital from
different sources so that the long-term funds needed for the
business are raised.
Thus, capital structure refers to the proportions or
combinations of equity share capital, preference share
capital, debentures, long-term loans, retained earnings
and other long-term sources of funds in the total amount
of capital which a firm should raise to run its business.
It is nothing but ‘Security Mix.’
Capital Structure means ‘mix up of various sources of fund
in desire proportion. Decide the ratio of different types of
capital.

20. “Capital structure is the combination of debt and equity
securities that comprise a firm’s financing of its
assets.”— John J. Hampton.
Components of Capital Structure:
The components of Capital Structure are as follows:
I. Equity Share Capital:
Equity share capital is provided by equity
shareholders and it is the basic source of
financing activities of business. The holders of such
shares bear ultimate risk associated with the
ownership. Equity shares carry dividend at a fluctuating
rate, depending upon the profits earned by
the company.

21. II. Preference Share Capital:
Preference shares carry dividend at a fixed rate and enjoy
preferential right over equity shares for return of capital in case of
winding up of the company. Unlike equity shareholders, preference
shareholders have limited voting rights.
III. Retained Earnings:
The part of the profit retained by the company for meeting future
financial needs and for expansion of the firm is known as retained
earnings. In simple words, it is ploughing back of profits.
IV. Borrowed Capital:
It consists of the following:
A. Debentures:
A debenture is a certificate of loan evidencing the fact that the company
is liable to pay a specified amount with interest at an agreed rate.
B. Term Loans:
Term loans are provided by banks and other financial institutions at a
fixed rate of interest.

22. THANK YOU