CORPORATE FINANCE

Corporate Finance

Corporate Finance

Introduction

Financial managers' deal with the value and costs related with the business enterprise. They focus on the area of finance that emphasizes particularly on the way by which large companies can create value and sustain a particular profitability by making efficient use of all resources that the company has to develop and prosper. Finance makes the decisions, which are directly related to operating and financial operations that are taken every day. Starting from the main objective of corporate finance, rather than as stated above is to maximize profit for shareholders or owners, one of the situational factors in order to carry out is without doubt the relevant measuring the contribution of a decision.

Net Present Value is related to Cost-benefit analysis

Cost-benefit is an analysis of different alternatives in order to figure out whether the benefits are more than the costs. The costs and benefits of the program is evaluated in terms of the willingness of the people to pay for them (benefits) or the people willingness to avoid to pay them (costs). Investment and Projects opportunities whose NPV is positive are good for the businesses. They increase the benefits and value of the firm and help businesses to figure out the costs-benefits analysis. On the other end, the projects and investments whose NPV is negative would give the company an answer that they would lose the money at present if the program is not done. Hence, the company would be incurring the cost instead of benefits. Positive NPV programs should be accepted and negative NPV programs should be rejected. If NPV is zero, it means that the company is neither at gain nor at loss.

An interest rate is just a price.

Interest rate is just a price that could be simply explained by the financing of the business concept. For example, if you take a loan from the bank at say 3% interest rate, then 3% interest rate is the amount of money you pay the bank for using your money (the price of loan). If putting your money in saving account, the thing that you're actually doing is making the bank lend your money. The bank agrees to pay you the interest rate, so in another way you're charging on the money that you've given to the bank for their use. In short, the interest the bank is paying you is the amount of price that you're charging ...