Corporate finance is a segment of finance which deals with the decisions taken by the different corporations.
Corporate finance studies and analyses the tools that mandatory in arriving at such corporate decisions. The primal objective of corporate finance is the maximization of corporate value by minimizing corporate risks.
In the study of
corporate finance it is important to analyze the long term, short term decisions that are taken in the corporate sector.
Capital Investment Decisions:
The goal of the corporate sector is to maximize return on investing in projects which have a positive Net Present Value.
Capital investment decision is composed of :
1. Investment Decision
2. The Dividend Decision
Working Capital Management:
This type of corporate finance is used the management of the current assets of the company. It also deals with short term financing such that the cash flows and return are acceptable.
Financial Risk Management:
Financial Risk Management is vital for Corporate Finance. It basically highlights the risks that are to be hedged by the use of different financial instruments. The financial instruments are changes in the commodity prices, interest rates,foreign exchange rates and stock prices. Derivatives like options, future contracts, forward contracts and swaps are used as instruments of financial risk management.