Skip to main content

Introduction to Corporate Finance || HSC || SP || Rapid Revision Notes

 IIntroduction to Corporate Finance

Meaning of Corporate Finance: 

         Corporate finance deals with the raising and using of finance by a corporation. It deals with financing the activities of the corporation, capital structuring and making investment decisions. 

            Henry Hoagland expresses the view that "corporate finance deals primarily with the acquisition and use of capital by business corporation." 

            It includes financial planning, study of capital market, money market and share market. It also covers capital formation and foreign capital. Even financial organisations and banks play vital role in corporate financing. 

Importance of Corporate Finance: 

  1. Helps in Decision Making 
  2. Helps in Raising Capital 
  3. Helps in Research and Development 
  4. Helps in Smooth Running of Business 
  5. Brings Co-ordination between Various Activities 
  6. Promotes Expansion and Diversification 
  7. Managing Risk 
  8. Replace Old Assets 
  9. Payment of Dividend and Interest 
  10. Payment of Taxes and Fee
Factors affecting Working Capital Requirement:
  1. Nature of Business
  2. Size of Business 
  3. Volume of Sales 
  4. Production Cycle 
  5. Business Cycle 
  6. Terms of Purchase and Sales 
  7. Credit Control 
  8. Growth and Expansion 
  9. Management ability 
Capital Structure:
            A company can raise its capital from different sources. i.e. owned capital or borrowed capital or both. The owned capital consists of equity share capital, preference share capital, reserves and surplus. On the other hand, borrowed sources are debentures, loans, etc. A combination of different sources are used in capital structure. 
            Capital structure means 'mix up of various sources of funds in desired proportion'.
 
Components of Capital Structure:
        1. Equity Share Capital                 (Fluctuating Dividend) 
        2. Preference Share Capital           (Fixed Dividend) 
        3. Retained Earnings 
        4. Borrowed Capital                      (Fixed Interest) 
                1) Borrowed Capital 
                2) Term Loans

Difference between Fixed Capital and Working Capital


Labels

Labels:
Location: Shrirampur, Maharashtra, India

Comments

Post a Comment

Popular posts from this blog

Introduction to Income Tax Act, 1961

Introduction to Income Tax Act, 1961 Introduction: Tax is a payment made by individual and organization to the government. Government needs money for financing of defense, development such as construction of roads, dams, power projects, railways, health services etc.. Funds for all these requirements are collected by way of taxes. Taxes are the major source of revenue of any state. The role of the government is not just to maintain law and order but also to provide the above to the citizens. In India all the taxes are divided into two parts i.e. Direct & Indirect Tax. Wealth Tax, Income Tax, Gift Tax, Corporate Tax are included in direct taxes. Service Tax, Central Excise, Custom duty, Sales Tax, VAT are the indirect taxes. In the year 2017 GST has replaced all these indirect taxes. Out of the above taxes excluding VAT all the taxes are collected by central government. VAT is an important source of income in the hands of state government. Structure of Taxation in India: 1. ...
Post a Comment
Read more

Canon of Taxation

Canon of Taxation By canons of taxation, we simply mean the characteristics or qualities which a good tax system should possess. It refers to the guiding rules and principle to make tax collection system effective and functional. In fact, canons of taxation are related to the administrative part of a tax as it is related to the rate, amount, method and collection of a tax. Canons of Taxation are broadly classified into two heads as: A) Adam Smith’s canons of taxation B) Additional canons of Taxation A) Adam Smith’s canons of taxation: In his famous book ‘Wealth of Nation’, Adam Smith presented 4 canons of taxation which are also commonly referred to as the Main Canons of Taxation. They are as follows: 1)   Canon of equality or equity: By equality is meant equality of sacrifice. Accordingly, Canon of equality states t that the burden of taxation must be distributed equally or equitably in relation to the ability of the tax payers Hence, to ensure canons of equality, taxes ...
Post a Comment
Read more

Basics of Cost Accounting - 7: Cost Unit and Cost Centre

Cost Unit and Cost Centre A) Cost Unit:            The cost unit is defined as the unit of product, service, time, activity, or combination in relation to which cost is estimated. At the time of preparing the cost statements and accounts, a particular unit is required to be selected. It helps to identify the cost accurately and allocate the various expenses. It assists the cost measurement process of the company and promotes comparison. Cost Unit Example- The cost unit of the hotel industry is a room and the cost unit of the steel industry would be a ton. This is preceded by the cost centre.  There are both simple units and complex units in cost units.  1. Simple/Single Cost Unit: A simple unit represents a single standard measurement like per kilogram, per piece, per metre, etc.  2. Composite/Complex Cost Unit: Complex unit uses a combination of two simple units like per kilowatt-hour, per tonne-kilometre, etc.  Characteristics ...
Post a Comment
Read more