CORPORATE

FINANCE

PEC University of Technology

 Introduction

Finance is defined as provision of money at

the time when it is required.
 Importance of Finance
For Entities For Individuals

Every enterprise, whether Availing Necessities

big, medium or small needs Procuring Assets like house,
finance to start and carry vehicle etc.
operations and achieve its Buying Household Items
targets Daily Consumption
Establishing Business: Expenditures
acquiring land, building, Investments
machinery, equipments,
Occasions
other investments etc.
Production: procuring raw Uncertain Requirements like
material, resources etc. medical expenses etc.
Marketing: marketing
research, advertising,
promotions, distribution etc.
Daily Operations: incurring
expenditures, giving salaries,
paying bills and taxes etc.
 Types of Finance
Public Finance Private Finance
Concerned with
Deals with requirements, receipts
requirements, receipts and disbursements of
and disbursements of funds in case of:
funds in the Individual (Personal
government institutions Finance)
like: Profit seeking business
State Govt. organization (Business
Finance)
Central Govt. Non-profit organization
Local Self Govt. (Finance of Non-profit
Organization)
 Private Finance
Finance for
Personal Business
Non-Profit
Finance Finance
Organization
Deals with The study of Concerned
analysis of principles, with the
principles and practices, practices,
practices procedures procedures
involved in and problems and problem
managing concerning involved in
ones own financial financial
daily need of management management
funds of profit of charitable,
making religious,
organizations educational,
engaged in social and
the field of other similar
 Business Finance
The term Business Finance connotes finance of
business activities.
It is combination of two words i.e. business + finance
Business is an economic activity which involves
regular production and or exchange of goods and
services with the main purpose of earning profits
through the satisfaction of human wants. It is
classified as industry and commerce.
Finance is provision of money at the time when it is
required management of flows of money
application of skill in the manipulation, use and
control of money
 Cont..
Three main approaches to finance:
1st approach views finance as to providing of funds
needed by a business on most suitable terms
confines finance to the raising of funds and to the
study of financial institutions and instruments from
where funds can be procured
2nd approach relates finance to cash
3rd approach views finance as being concerned with
raising of funds and their effective utilization
Hence, Business Finance can be referred as an
activity or a process which is concerned with
acquisition of funds, use of funds and distribution of
profits by a business firm.
Classification of Business Finance

Sole- Company or
Partnership
Proprietory Corporate
Firms Finance
Finance Finance
Single Is an Is an
individual association of association of
promotes, two or more many
finances, persons to persons who
controls and carry on as contribute
manages the co-owners of money or
business a business moneys
enterprise and to share worth to a
its profits or common
losses stock and
employ it in
some
 Sole Proprietorship
Advantages
Easiest to start
Disadvantages
Limited to life of
Least regulated
owner
Single owner keeps all
Equity capital limited
of the profits
to owners personal
Taxed once as
wealth
personal income Unlimited liability

Difficult to sell
ownership interest
Bears whole risk of
business
 Partnership
Advantages
Two or more owners Disadvantages
More capital available
Unlimited liability
Relatively easy to Partnership
start
dissolves when one
Income taxed once as
partner dies or
personal income
wishes to sell
Collectively share the
risk of business
Difficult to transfer
ownership
 Company/Corporation
Advantages
Limited liability
Unlimited life
Separation of
ownership and Disadvantages
management Cost and regulations
Transfer of ownership to set up and
is easy operate
Easier to raise capital Double taxation
 Corporate Finance
Corporate Finance is the process of raising,
providing and administering of all money/funds to
be used in a corporate (business) enterprise.

Hence, financial management practiced by

corporate (business) firms can be called as
corporate finance.

Financial Management is concerned with the

planning and controlling of firms financial
resources deals with finding out various sources of
raising funds for the firm and making most
appropriate use of such funds
Importance of Corporate Finance

The importance of financial management can well be

described as the importance of corporate finance.
Financial Management is applicable to every type of
organization, irrespective of size, kind or nature.
Financial Management helps in:
Financial planning and successful promotion of an
enterprise
Acquisition of funds as and when required at the
minimum possible cost
Proper use and allocation of funds
Taking sound financial decisions
Improving the profitability through financial controls
Increasing the wealth of the investors and nation