• Corporate Finance

    Corporate finance denotes the finance mechanism used by the corporates or the companies (public and private) to analysis any financial decision based on the expected outcome of the decision. Corporate finance also deals with the tools and process to calculate the expected outcome (profit or loss) from any kind of financial decisions.

    The primary aim of corporate finance is to enable the companies to take the wise financial decisions which will increase the shareholders’ value in the long run.

    The main rationales behind the corporate finance are

    • The company’s management always tries to invest in projects with high returns to maximize the value of the shareholders.
    • Company has to use the excess profit after dividend payment to invest in new projects to expand the business.
    • Sometimes companies are required to replace the old machines or plant with the new one to increase the production to gain more market share.
    • Sometimes companies are required to replace an existing product with a new product with more value and benefit to the customers to reposition itself in the market.

    All these expand or business decisions need capital investments and thus need proper corporate finance in place to calculate the expected outcome of those decisions. Wrong financial calculation can lead to wrong decision by the management which can incur severe loss for the company.

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