Unit 1 Introduction to corporate finance

Farwestren university BBS 7th semester Corporate finance

1. Unit 1: Introduction to Corporate Finance

2. Concept of Corporate Finance Corporate finance is the process of obtaining and managing finances in order to optimize a company's growth and value for its shareholders . Corporate finance refers to planning, developing and controlling the capital structure of a business. It aims to increase organizational value and profit through optimal decisions on investments, finances as well as dividends . It focuses on capital investments aimed at meeting the funding requirements of a business to attain a favorable capital structure. The concept focuses on investment, financing and dividend principle

3. Basic functions of corporate finance Financing Financial management Capital budgeting Risk management C orporate governance

4. Financing Raising capital to support company operations and investment Financial management Management of company cash flow and balancing the ratio debt and equity financing to maximize company value Capital budgeting selecting those projects based on risk and expected return that are best use of company's resources Risk management Managing insurable and uninsurable risk exposures Corporate governance Ensuring firm is run ethically and in shareholders' interest

5. Corporate financial decisions Investment decision Financing decision Dividend decision

6. Role of financial manager Analysis of the financial aspects of all decisions Analysis of investment decision Analysis of financing decision Analysis of dividend policy decision Analysis of financial condition of the firm analysis of financial Markets Analysis of Risk

7. Shareholders' wealth maximization goal of corporation should be to increase its stock price as much as possible

8. Managerial actions to maximize shareholder wealth Projected cash flow Time element Risk factor Use of debt Dividend policy

9. Ethics in financial decisions

10. A decision-making ideology that is based on the underlying moral philosophy of right and wrong The term “ethics of financial management” refers to the moral code of conduct that guides and governs the behaviour of professionals or managers. It mainly covers the principles and values an organisation should follow to maintain its competence in the industry, including integrity, credibility and fairness among its stakeholders. In the corporate world, reputation is everything; it plays a crucial role in deciding which organisation is trusted and which is not. This is why all organisations must consider the importance of ethical standards when dealing with their stakeholders.   In fact, ethics plays a significant role in financial management, including the planning, controlling,  financial modelling ,  credit management  and performance evaluation of all economic activities within an organisation . Moreover, financial management ethics involves other aspects of business life, like taking adequate measures to ensure employees and other persons of the establishment can meet their objectives while respecting the rules set by various regulatory bodies such as honesty, professional truthfulness, justice, respect and accountability. 

11. What are ethical issues in finance ? Financial fraud  and corruption Employee theft or embezzlement Insider trading Conflicts of interest in investment decisions  Market and wealth manipulation  Accounting and transactions fraud  Misrepresentation of financial statements  Tax evasion and avoidance Stealing funds