The study is related to the corporate finance which is an important concept for organizations. The study area encompasses both the financial asset valuation and the analysis of financial decisions aimed at creating value. The objective of the management team of a company should be the maximum possible value creation, that is, maximize profits for shareholders or owners, maximizing the value of the investment projects the company is taking and get the highest return possible.
Companies create value when the capital invested generates a return in excess of the cost thereof. The value of the company is represented by the market value of its assets, as is logical, it must be equal to the market value of its liabilities which, in turn, is equal to the sum of the market value of its shares more the market value of debt.
Corporate Finance is an area of finance that focuses on how managers can create value through financial decisions, basically the investment and financing decisions.
Corporate Finance is an area of finance that focuses on how managers can create value through financial decisions, basically the investment and financing decisions. Corporate Finance which is also known as financial management and corporate finance) are related and use knowledge of other disciplines, primarily economics and accounting.
Corporate finance focus on four types of decisions which include;
- Investment decisions, which focus on the efficient application of resources to acquire real assets.
- Funding decisions, studying fund raising (from investors who acquire financial assets issued by the company) for the company to acquire the assets in which it has decided to invest.
- Decisions on dividends, must balance crucial aspects of the entity. On the one hand, it involves a payment to equity capital and the other is to deprive the company of financial resources.
- Management decisions, decisions regarding operational and financial daily (as part of the investment and financing decisions).
Since the basic objective of corporate finance is to maximize value or wealth for shareholders or owners, one of the key issues focuses on measuring the contribution of a particular decision on shareholder value. To answer this question has created the techniques of appraisal or valuation of assets (Lawrence, 2008).
Financing Economic Investments
For organization, it is important to have complete knowledge about the financial performance of the company for the investment. In addition to this, ...