Corporate Finance:

Corporate finance is the field of

finance dealing with financial decisions that business enterprises
make and the tools and analysis used to make these decisions. The
primary goal of corporate finance is to maximize corporate value
while managing the firm.

The discipline can be divided into long-term and short-term

decisions and techniques. Capital investment decisions are long-
term choices about which projects receive investment, whether to
finance that investment with equity or debt, and when or whether
to pay dividends to shareholders.s financial risks. On the other
hand, short term decisions deal with the short-term balance of
current assets and current liabilities; the focus here is on managing
cash, inventories, and short-term borrowing and lending (such as
the terms on credit extended to customer.)

Thus, the terms “corporate finance” and “corporate financier” may

be associated with transactions in which capital is raised in order to
create, develop, grow or acquire businesses.
Contents:
 Capital investment decisions
o The investment decision
 Project valuation
 Valuing flexibility
 Quantifying uncertainty
o The financing decision
o The dividend decision
 Working capital management
o Decision criteria
o Management of working
capital
 Relationship with other areas in
finance
o Investment banking
o Financial risk management
o Personal and public finance
 Related professional qualifications
 References
 Capital
investment decisions are long-term corporate finance decisions
relating to fixed assets and capital structure. Capital investment
decisions thus comprise an investment decision, a financing
decision, and a dividend decision.

Management must allocate limited resources between competing

opportunities (projects) in a process known as capital budgeting.

By making this investment decisions requires to compute the value

of opp Business valuation, stock valuation, and fundamental
analysis

In general, each project's value will be estimated using a discounted

cash flow (DCF) valuation, and the opportunity with the highest
value, as measured by the resultant net present value (NPV)
opportunity of the project.

Management will therefore (sometimes) employ tools which place an

explicit value on these options. So, whereas in a DCF valuation the
most likely or average or scenario specific cash flows are
discounted, here the “flexible and staged nature” of the investment
is modeled, and hence "all" potential payoffs are considered. The
difference between the two valuations is the "value of flexibility"
inherent in the project.

In a typical sensitivity analysis the analyst will vary one key factor
while holding all other inputs constant, ceteris paribus. Often,
several variables may be of interest, and their various combinations
produce a "value-surface" (or even a "value-space"), where NPV is
then a function of several.
Management must therefore identify the "optimal mix" of financing
—the capital structure that results in maximum value. variables.

Equity financing is less risky with respect to cash flow

commitments, but results in a dilution of ownership, control and
earnings. The cost of equity is also typically higher than the cost of
debt, and so equity financing may result in an increased hurdle rate
which may offset any reduction in cash flow risk.

Whether to issue dividends, and what amount, is calculated mainly

on the basis of the company's inappropriate profit and its earning
prospects for the coming year.

These free cash flows comprise cash Management must also decide
on the form of the dividend distribution, generally as cash dividends
or via a share buyback. Various factors may be taken into
consideration: where shareholders must pay tax on dividends, ining
after all business expenses have been met.

As above, the goal of Corporate Finance is the maximization of firm

value. In the context of long term, capital investment decisions, firm
value is enhanced through appropriately selecting and funding NPV.

Working capital is the amount of capital which is readily available

to an organization. That is, working capital is the difference between
resources in cash or readily convertible into cash (Current Assets),
and cash requirements (Current Liabilities).strive investments.

working capital decisions differ from capital investment decisions in

terms of discounting and profitability considerations; they are also
"reversible" to some extent.

Working capital management decisions are therefore not taken on

the same basis as long term decisions, and working capital
management applies different criteria in decision making.

Cash management. Identify the cash balance which allows for the
business to meet day to day expenses, but reduces cash holding
cost Short term financing. Identify the appropriate source of
financing, given the cash conversion cycle: the inventory is ideally
financed by credit granted by the suppliers.

Raising capital via the issue of other forms of equity, debt and
related securities for the refinancing and restructuring of
businesses

Financing joint ventures, project finance, infrastructure finance,

public-private partnerships and privatisations

Secondary equity issues, whether by means of private placing or

further issues on a stock market, especially where linked to one of
the transactions listed above.

This area is related to corporate finance in two ways. Firstly, firm

exposure to business and market risk is a direct result of previous
Investment and Financing decisions. Secondly, both disciplines
share the goal of enhancing, or preserving, firm value.
Corporate finance utilizes tools from almost all areas of finance.
Some of the tools developed by and for corporations have broad
application to entities other than corporations, for example, to
partnerships, sole proprietorships, not-for-profit organizations,
governments, mutual funds, and personal wealth management.

Finance qualifications:

Degrees: Masters degree in Finance (MSF), Master of Financial

Economics

Certifications: Chartered Financial Analyst (CFA), Corporate

Finance Qualification (CF), Certified International Investment
Analyst (CIIA), Association of Corporate Treasurers (ACT), Certified
Market Analyst (CMA/FAD) Dual Designation, Master Financial
Manager (MFM).

Because corporations deal in quantities of money much greater

than individuals, the analysis has developed into a discipline of its
own. It can be differentiated from personal finance and public fi The
sources of financing will, generically, comprise some combination of
debt and equity financing. Financing a project through debt results
in a liability or obligation that must be serviced, thus entailing cash
flow implications independent of the project's degree of success.