Corporate Finance Fundamentals and Decisions

Corporate Finance Goals and Scope

Corporate finance concerns how businesses obtain, allocate, and manage financial resources to increase the value of the firm for its shareholders. Its scope includes decisions about funding sources, capital structure, investments, cash management, and the distribution of surplus funds. Financial managers seek to balance long-term growth opportunities with obligations to creditors and the interests of shareholders. The field is organized around three central decisions: capital budgeting, capital structure, and working capital management. Capital budgeting evaluates value-creating projects using tools such as discounted cash flow analysis and net present value. Capital structure determines the appropriate mix of debt, equity, retained earnings, and hybrid securities, while working capital management oversees short-term assets and liabilities, including cash, inventories, receivables, and borrowing. Corporate finance also addresses dividend policy, risk, valuation, and the relationship between financing choices and firm value.

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Capital Budgeting

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