Corporate Finance

Corporate Financial Management is a managerial activity which concerned with the planning and controlling the firms financial resources. Finance is the Science or Art to manage Money and other Assets. It was a branch of Economics till 1980s but now considered as a separate body of knowledge. Corporate Finance is concerned with the maintenance and creation of economic value or wealth. Consequently this course focuses on decision making towards creating wealth.

 When to invest in new assets? When to replace existing assets? When to borrow from banks? When to issue Debenture or Bonds? When to issue Equity Shares? When to extend credit to a customer? How much cash to maintain?

 The Finance manager of a business firm generally involves in the following decisions: (i) Investment Decisions (ii) Financing Decisions (iii) Pay out Decisions

Objective of Corporate Finance

Profit Maximization Vs. Wealth Maximization

The Agency Problem

Shareholders as owners of a company are the principals and managers are their agents. Theoretically managers should act in the best interests of shareholders. In practice, managers may pursue their own personal goals. They may play safe.