ADVANCE CORPORATE FINANCE LECT 1

8/9/2019 ADVANCE CORPORATE FINANCE LECT 1

http://slidepdf.com/reader/full/advance-corporate-finance-lect-1 1/23

BY- SURAJ PRAKASH

ADVANCECORPORATE FINANCE



SOME BASIC OF ACF



FINANCE

Finance is the science of fundsmanagement



F inance includes saving money and often includeslending money.

The field of finance deals with the concepts of time , money , and risk and how they areinterrelated. It also deals with how money is spent

and budgeted.



CORPORA TEF INA NC E

P ERSO NAL F INA NC E

PUBL IC F INA NC E

AREA OF FINANCE



CORPORATE FINAN CE

Corporate finance is an area of finance dealing with financialdecisions of business enterprises make and the tools andanalysis used to make these decisions.

The primary goal of corporate finance is to maximizecorporate value while managing the firm's financial risks.

A lthough it is in principle different from managerial financewhich studies the financial decisions of all firms, rather thancorporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms.



CORPORATE FINANCE CAN CLASSIFIED INTOTWO:-

1. LONG TERM FINANCE.

2.SHORT TERM FINANCE.



PU BLIC FINANCE

Public finance is a field of economics concerned withpaying for collective or governmental activities, andwith the administration and design of those activities.

The field is often divided into questions of what thegovernment or collective organizations should do or

are doing, and questions of how to pay for thoseactivities.



P ERSONAL FINANCE

Personal finance is the application of the principles of finance to themonetary decisions of an individual or family unit.

It addresses the ways in which individuals or families

Obtain, budget , save, and spend monetary resources over time, takinginto account various financial risks and future life events.

Components of personal finance might include

1.checking and savings accounts ,2.credit cards and consumer loans ,

3.investments in the stock market , retirement plans , social securitybenefits, insurance policies, and income tax management.



MEANING OF STRATEGY

Strategy , a word of military origin, refers to a

plan of action designed to achieve a particulargoal .



DEFINITION OF MANAGEMENT

Management in all business areas and organizational activitiesare the acts of getting people together to accomplish desiredgoals and objectives.

Management comprises planning , organizing , staffing , leadingor directing, and controlling an organization (a group of one ormore people or entities) or effort for the purpose of accomplishing a goal.



Planning

Planning in organizations is both the organizational processof creating and maintaining a plan ; and the psychologicalprocess of thinking about the activities required to create a

desired goal on some scale.

planning predicts what the future should look like.



Organizing

Organizing ( also spelled organising) is the act of rearranging elements following one or more rules .

Anything is commonly considered organized when it lookslike everything has a correct order or placement.



Staffing

Staffing is the process by which an organisation creates apool of applicants and makes a choice from that pool toprovide the right person at the right place at the right timeto increase the...



Le ading

The act of guiding, directing, governing, orenticing; guidance.

Leadership is stated as the "process of socialinfluence in which one person can enlist the

aid and support of others in theaccomplishment of a common task."



Contr o lControl is one of the managerial functions like planning,organizing, staffing and directing. It is an important functionbecause it helps to check the errors and to take the correctiveaction so that deviation from standards are minimized and

stated goals of the organization are achieved in desiredmanner.

A ccording to modern concepts, control is a foreseeing actionwhereas earlier concept of control was used only when errorswere detected. C ontrol in management means settingstandards, measuring actual performance and takingcorrective action. Thus, control comprises these three mainactivities



The diff e r e nt d ec isi ons c an b e c lassifi e d int o:

1. The routine working capital and cash management decisions.

2. Dividend decisions

3. Investment decisions

4. Financial forecasting

5. International financial decisions

6. Portfolio management

7. Risk management

8. Cash management



STRATEGIC MANAGEMENT

Strategic or institutional management is the conduct of drafting, implementing and evaluating cross-functionaldecisions that will enable an organization to achieve its long-term objectives.

It is the process of specifying the organization 's mission , visionand objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve theseobjectives, and then allocating resources to implement thepolicies and plans, projects and programs.

A balanced scorecard is often used to evaluate the overallperformance of the business and its progress towardsobjectives.



Role of Finance and strategy

in Management processManagement Process ----P lanning, O rganizing, staffing,leading and controlling.

R ole of F inance in strategic Management--------

Investment P rinciple----The firm is expected to invest in onlythose assets where they are expected to get greater returnsthan minimum expected return or Hurdle Rate. R iskierprojects have to have higher returns.



Financing P rinciple----Mixture of Debt and Equity on the basisof type of industry/ P roduct /future trends, so as to minimize thehurdle rate.

Dividend P rinciple-----If the firm cannot find investment

opportunities that can earn higher return than Hurdle rate,money is refunded to investors as Dividend.



Strat e gy dr oop

Strategy Droop---The organization as a whole may have takentoo many projects simultaneously. Topmanagement knows that there is going to bestrategic slippage or strategic droop .They start too many projects at a time, in thehope that this will compensate fordisappointing results . This cultivates in harmfulinterpersonal rivalry, excess competition forrecourses, bad politics and sometimes theresulted are inferior to what otherwise couldhave been achieved if lesser number of projectswere started.



Strategic management allows and organizationto be more proactive than reactive in shaping itsown future ; it allows an organization to initiate andinfluence activities and thus to exert control over itsown destiny. S mall business owners, chief executive officers, presidents and managers of many for-profit and non-profit organizations haverecognized and realized the benefits of strategicmanagement.

Historically, the principle benefit of strategicmanagement has been to help organizationsformulate better strategies through the use of the more systematic, logical and rationalapproach to strategic choice.



Benefits of SFM

Financial Benefits:1 .Improvement in sales.2.Improvement in profitability.

3.Improvement in productivity.

Non-Financial Benefits:1 .Improved understanding of competitors strategies.2.Enhanced awareness of threats.3.R educed resistance to change.4.Enhanced problem-prevention capabilities.

Date post:	29-May-2018
Category:	Documents
Upload:	surajprakash66
View:	218 times
Download:	1 times

ADVANCE CORPORATE FINANCE LECT 1

Documents