Question

What is the goal of Corporate Finance? Which 3 questions can be thought of
as the study of Corporate Finance?

Answer 1

Financial management is a process of planning decisions in order to maximize the owners wealth.Financial managers have a major role in cash Management, in acquisition,raising & allocating financial capital, trade off between risk and return.

Goals Of Corporate finance

1. Stockholder wealth maximization.
2. Profit Maximization.
3. Managerial reward maximization.
4. Behavioral goals and
5. Social Responsibilities.

Stockholder wealth maximization
* Wealth for long term
* Risk or uncertainty
* Timing of Returns
* Stockholder's Return.

Profit Maximization:
* single Period (short period less than a year).
* Organization can maximize short-term profits at the expense of its long term profitability.

The three basic questions a financial manager must consider are capital budgeting, capital structure, and working capital management.

Capital budgeting is the process where the financial manager tries to identify investment opportunities that are worth more to the firm than they cost to acquire.

A firms capital structure refers to the specific mixture of long-term debt and equity the firm uses to finance its operations. The financial manager has two concerns in this area. First: How much should the firm borrow? Second: What are the least expensive sources of funds for the firm?

Working capital refers to a firm's short-term assets, such as inventory, and its short-term liabilities, such as money owed to suppliers.