principals of corporate finance

1. Time Value of Money: This concept states that money available at present is worth more than the
same amount in the future due to its potential earning capacity. It is based on the idea that money
can be invested and earn a return, so it is beneficial to take advantage of this by investing rather
than waiting.

2. Risk and Return: This concept states that any investment carries an element of risk and in order to
receive a higher return, one must accept a higher level of risk. It is based on the idea that greater
rewards come with greater risks.

3. Cash Flow: This concept states that cash flow is the lifeblood of any financial decision. It is based
on the idea that an analysis of cash flow is necessary to determine the success or failure of an
investment.

4. Diversification: This concept states that diversification is key to reducing risk. It is based on the
idea that spreading investments over a variety of different assets can reduce the risk of any one
investment failing.

5. Capital Budgeting: This concept states that capital budgeting is a critical tool for evaluating
investments. It is based on the idea that an analysis of costs, revenues, and risks should be
conducted to determine the viability of any potential investment.