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:
Location: Shrirampur, Maharashtra, India

Comments

Post a Comment

Popular posts from this blog

The Finance Journey of Aarav’s Café

Aarav, a young entrepreneur, always dreamed of owning a coffee shop. He was confident about his coffee making skills, but soon realized that turning this dream into reality required more than passion, it required finance. Finance, he learned, is the art and science of managing money: planning, raising, investing, and controlling financial resources to achieve business goals. When starting his venture, Aarav explored various types of business structures. He considered a sole proprietorship for its simplicity and control but noted the drawback of unlimited personal liability. Partnerships offered shared responsibility and resources but also shared risks. A private limited company, though more regulated, provided limited liability and made it easier to raise funds. Aarav decided to register his café as a private limited company, keeping future expansion in mind. Very quickly, he discovered that finance is the lifeblood of any business. It is needed before operations begin, to purchase...
Post a Comment
Read more

📖 The Story of Sutra Café: Understanding Financial Statements

  📖 The Story of Sutra Café: Understanding Financial Statements Ravi, Meera, and Arjun had always dreamt of running a small business together. After finishing their studies, they decided to open a cozy little café near their college campus. They named it Sutra Café , believing that it would weave together their passion for coffee, friendship, and entrepreneurship. In the very first month, their café was buzzing with customers—students, professors, and office-goers all loved their coffee and snacks. By the end of the month, the friends were excited to know whether they had really made money or not. But how could they be sure? Their mentor, Professor Shah , smiled and said, “Every business speaks the language of financial statements. If you learn to read this language, you’ll always know the true story of your café.” Income Statement – The Story of Profitability Professor Shah first taught them about the Income Statement , also called the Profit and Loss Statement . This...
Post a Comment
Read more

Basics of Cost Accounting - 9: Allocation, Apportionment and Reapportionment of Overheads

 Allocation, Apportionment and Reapportionment of Overheads           The objective of Cost Accounting is classifying costs and recording an appropriate allocation of expenditure for the determination of the costs of products or services, and for the presentation of suitably arranged data for the purpose of control and guidance of management A) Allocation of Overheads When items of cost are identifiable directly with some products or departments such costs are charged to cost centres. This process is known as cost allocation. It is the charging of discrete, identifiable items of cost to cost centres or cost units.  It is complete distribution of an item of overhead to the departments or products on logical or equitable basis is called allocation.  Where a cost can be clearly identified with a cost centre or cost unit, then it can be allocated to that particular cost centre or unit.  Allocation is the process by which cost items are charg...
Post a Comment
Read more