Every decision made in a business has financial implications, and any decision that involves the use of money is a corporate financial decision. Defined broadly, everything that a business does fits under the rubric of corporate finance It is, in fact, unfortunate that we even call the subject corporate finance, because it suggests to many observers a focus on how large corporations make financial decisions and seems to exclude small and private businesses from its purview. A more appropriate title for this discipline would be Business Finance, because the basic principles remain the same, whether one looks at large, publicly traded firms or small, privately run businesses. All businesses have to invest their resources wisely, find the right kind and mix of financing
to fund these investments, and return cash to the owners if there are not enough good investments.
What Will You Learn?
- A firm is a group of claimants of share holders, creditors, suppliers, customers and employees. The shareholders appoint a Board of directors to see the functioning and directing the company. The directors will act in the interest of the claimant not act in their own interest. In corporate finance theory generally agrees that the objective of a firm is to maximize the profit and wealth maximization. Wealth maximization rules require managers to work towards a sustainable increase in the price of the firm’s stock.
Chapter 1The Financial Environment
Chapter 2 Valuing Bonds
Chapter 3 Valuing Stocks