THE SAINT AUGUSTINE UNIVERSITY OF TANZANIA

TYPE OF ASSIGNMENT INDIVIDUAL ASSIGNMENT

NAME JOHN, ISACK .J
REG. NUMBE PGDAF 77862
COURSE PGDAF
SUBJECT CORPORATE FINANCE
SUBJECT CODE FI 500
LECTURE NAME MRAWA DANIEL
DATEOF SUBMISSION MONDAY 18 2019

QUESTIONS

1. Explain the meaning of corporate finance


2. Explain the role of corporate finance manager in Morden business management
QUESTION ONE

Corporate finance is the area of finance that dealing with source of funding, the capital structure of
the corporations and investment decisions, its also include tools and analyses used to allocate the
financial resources.the primary goal of the corporate finance is to maximise or increase shareholder
value through planning and implementing management resources while balancing risk and
profitability.

Corporate finance is often associated with firm’s decision to undertake capital investment and other
investment-related decisions, it deal with providing money for the business and the source that
provide them, the source provide capital to corporation to pay for structural, improvement,
expansion and other value added projects. Corporate finance can be split in two basic questions:

• What real assets should the firm invest in? Capital budgeting (investment decisions) is a
process a business undertakes to evaluate potential investment projects which require
investment in real assets such as land, plant, machinery and new product development.
• How should the real assets be financed? The financing decisions (capital structure
decisions) considers both, debt and equity (share capital) that are going to be used to finance
the investments required in a project.

QUESTION TWO

The role of financial managers in Morden business management is changing in response to

technological advances that have significantly reduced the amount of time it take to get financial
informations and prepare repots, with the main responsibility of monitoring company finances,
financial managers perform data analyse more easily and advise senior managers on profit
maximisation ideas.

Some of the major functions of financial managers are as follows

Estimate capital requirement

This role require the financial manager to make estimations with regard to capital requirement of
the company.his will depend upon expected cost and profit and future program and policies of the
concern. Estimation is to be made in adequate manner which increase earning capacity of the
firm.the estimations of the capital requirement will involve cost of assets, both the fixed assets and
current assets. Estimation of the capital must involve analyses of the returns.
Financial risk management

Companies that enter into transactions or companies which has subsidiaries, associates or parents
abroad are often subjected to the transaction risk, translation risks and economic risk Transactions
risk arise on the short-term foreign currency transactions that the actual

income or cost may be different from the income or cost expected when the traction was agreed, it
refers to the adverse effect that foreign exchange rate fluctuations can have on completed
transaction prior to the settlement.

Translation risk is the risk of change in the financial position of the company (assets, liabilities and
equity) due to exchange rate changes and usually seen while reporting the consolidated financial
financial statement of multiple subsidiaries operating overseas in domestic currency

Economic risk, transaction risk is seen as short-term manifestation of economic risk, which could be
defined as the risk of the present value of the companies expected future cash flows being affected
by the exchange rate movement over the time

Its difficult to measure economic risk although its effects can be described and and its also difficult
to hedge against it.

Its role of the financial manager to manage transaction risk, translation risk, economic risk and
other financial risks.

Investment decisions

Morden financial managers must have knowledge on investment decisions this will help to know
much to invest in real assets and which specific projects to undertake (capital budgeting decisions)
and provide analytical techniques to aid these sorts of decision the financial experts has to be aware
of a wide variety of factor which might have some influence on the wisdom of proceeding with a
particular investment.these range from corporate strategy and budgeting restrictions to culture and
commitment of individuals likely to be called upon to support an activity.

Determine capital structure and Choose source of fund

Once the requirement of the capital funds has been determined ,a decision regarding the kind and
proportional of the various source of fund has been taken, for this the financial manager has to
determine source of fund which may either debt finance or issue share or the proper mix of the
equity and debt. The capital structure is a particular combination of debt and equity used by the
company to finance its overall operations and debt come in form of bond issue or loan while equity
may come in the form of common stock preference stock or retained earnings.
Treasury management

The management of cash may fall under aegis of the financial manager. Many firm has larger of the
cash which need to be managed properly to obtain a high return for shareholders. Monitor and
control of the flow of the cash coming into and going out the organization, helping ensure the
company business and investment needier met, in organizations huge cash (tied cash) may cost
organisation hence its responsibility of the manager to keep liquid assets to cover cash flow and cost
of inventory consumable suppliers. Other areas of responsibilities might include inventory control
creditors and debtors management and issue of solvency.

Conclusion

The study Corporate finance has primary goal of maximise shareholder value and deal with
monetary decisions that the business entity make, financial managers help the management to make
financial decisions by monitor financial details to ensure that legal requirement are meet, review
company financial reports and seek way to reduce cost, prepare financial statements business
activities reports and forecasts and analyse market trends to find opportunities for expansion or for
acquiring other companies.
REFFERENCES

1 Westone, J.F, Brigham, E.F & Beslay. S; (1996) Essential of the managerial finance (11
ed).Dryden press

2. Arnold,G.(2005).Corporate financial management(3 ed).financial times


3. Ross, S.A.,Westerfield, R.W.,Jordan, B.D (2001) Essential of corporate finance (3 ed)

4. Denzel, W.,Antony, H(2001)Corporate finance principles &practice(2 ed) financial times