ADVANCE

CORPORATE FINANCE

BY- SURAJ PRAKASH

SOME BASIC OF “ACF”
 FINANCE

“Finance is the science of funds

management”
Finance includes saving money and often includes
lending money.

The field of finance deals with the concepts of

time, money, and risk and how they are
interrelated. It also deals with how money is spent
and budgeted.
 AREA OF FINANCE

CORPORATE PERSONAL
FINANCE FINANCE

PUBLIC FINANCE
 CORPORATE FINANCE
Corporate finance is an area of finance dealing with financial
decisions of business enterprises make and the tools and
analysis used to make these decisions.

The primary goal of corporate finance is to maximize

corporate value while managing the firm's financial risks.

Although it is in principle different from managerial finance

which studies the financial decisions of all firms, rather than
corporations alone, the main concepts in the study of
corporate finance are applicable to the financial problems of
all kinds of firms.
CORPORATE FINANCE CAN CLASSIFIED INTO
TWO:-

1. LONG TERM FINANCE.

2.SHORT TERM FINANCE.

 PUBLIC FINANCE

Public finance is a field of economics concerned with

paying for collective or governmental activities, and
with the administration and design of those activities.

The field is often divided into questions of what the

government or collective organizations should do or
are doing, and questions of how to pay for those
activities.
 PERSONAL FINANCE
Personal finance is the application of the principles of finance to the
monetary decisions of an individual or family unit.

It addresses the ways in which individuals or families

Obtain, budget, save, and spend monetary resources over time, taking
into account various financial risks and future life events.

Components of personal finance might include

1.checking and savings accounts,

2.credit cards and consumer loans,

3.investments in the stock market, retirement plans, social security

benefits, insurance policies, and income tax management.
 MEANING OF STRATEGY

Strategy, a word of military origin, refers to a

plan of action designed to achieve a particular
goal.
 DEFINITION OF MANAGEMENT
Management in all business areas and organizational activities
are the acts of getting people together to accomplish desired
goals and objectives.

Management comprises planning, organizing, staffing, leading

or directing, and controlling an organization (a group of one or
more people or entities) or effort for the purpose of
accomplishing a goal.
 Planning

Planning in organizations is both the organizational process

of creating and maintaining a plan; and the psychological
process of thinking about the activities required to create a
desired goal on some scale.

planning predicts what the future should look like.

 Organizing

Organizing (also spelled organising) is the act of

rearranging elements following one or more rules.

Anything is commonly considered organized when it looks

like everything has a correct order or placement.
 Staffing

Staffing is the process by which an organisation creates a

pool of applicants and makes a choice from that pool to
provide the right person at the right place at the right time
to increase the...
 Leading

The act of guiding, directing, governing, or

enticing; guidance.

Leadership is stated as the "process of

social influence in which one person can enlist
the aid and support of others in the
accomplishment of a common task."
 Control
Control is one of the managerial functions like planning,
organizing, staffing and directing. It is an important function
because it helps to check the errors and to take the corrective
action so that deviation from standards are minimized and
stated goals of the organization are achieved in desired
manner.

According to modern concepts, control is a foreseeing action

whereas earlier concept of control was used only when errors
were detected. Control in management means setting
standards, measuring actual performance and taking
corrective action. Thus, control comprises these three main
activities
 The different decisions can be
classified into:
1. The routine working capital and cash management decisions.

2. Dividend decisions

3. Investment decisions

4. Financial forecasting

5. International financial decisions

6. Portfolio management

7. Risk management

8. Cash management
 STRATEGIC MANAGEMENT
Strategic or institutional management is the conduct of
drafting, implementing and evaluating cross-functional
decisions that will enable an organization to achieve its long-
term objectives.

It is the process of specifying the organization's mission, vision

and objectives, developing policies and plans, often in terms of
projects and programs, which are designed to achieve these
objectives, and then allocating resources to implement the
policies and plans, projects and programs.

A balanced scorecard is often used to evaluate the overall

performance of the business and its progress towards
objectives.
Role of Finance and strategy
in Management process
 Management Process----Planning, Organizing, staffing,
leading and controlling.

 Role of Finance in strategic Management--------

 Investment Principle----The firm is expected to invest in only

those assets where they are expected to get greater returns
than minimum expected return or Hurdle Rate. Riskier
projects have to have higher returns.
Financing Principle----Mixture of Debt and Equity on the basis
of type of industry/ Product /future trends, so as to minimize the
hurdle rate.
Dividend Principle-----If the firm cannot find investment
opportunities that can earn higher return than Hurdle rate,
money is refunded to investors as Dividend.
Strategy droop
 Strategy Droop---
 The organization as a whole may have taken
too many projects simultaneously. Top
management knows that there is going to be
strategic slippage or strategic droop.
 They start too many projects at a time, in the
hope that this will compensate for disappointing
results. This cultivates in harmful interpersonal
rivalry, excess competition for recourses, bad
politics and sometimes the resulted are inferior
to what otherwise could have been achieved if
lesser number of projects were started.

Strategic management allows and organization
to be more proactive than reactive in shaping its
own future; it allows an organization to initiate and
influence activities and thus to exert control over its
own destiny. Small business owners, chief
executive officers, presidents and managers of
many for-profit and non-profit organizations have
recognized and realized the benefits of strategic
management.
Historically, the principle benefit of strategic
management has been to help organizations
formulate better strategies through the use of
the more systematic, logical and rational
approach to strategic choice.
Benefits of SFM
 Financial Benefits:
1.Improvement in sales.
2.Improvement in profitability.
3.Improvement in productivity.

Non-Financial Benefits:
1.Improved understanding of competitors strategies.
2.Enhanced awareness of threats.
3.Reduced resistance to change.
4.Enhanced problem-prevention capabilities.