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प्रश्न
What is corporate finance and state two decisions which are the basis of corporate finance?
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उत्तर
Definition:
‘‘corporate finance deals primarily with the acquisition and use of capital by business corporation.’’
Meaning:
The term corporate finance also includes financial planning, study of the capital market, money market and share market. It also covers capital formation and
Two decisions that are the basis of corporate finance.
- Financing Decision: The business firm has access to the capital market to fulfill its financial needs. The firm has multiple choices of sources of financing. The firm can choose whether it wants to raise equity capital or debt capital. Firms can even opt for a bank loan, public deposits, debentures, etc. to raise funds. The finance manager ensures that the firm is well capitalised i.e. they have the right amount of capital and that the firm has the right combination of debt and equity.
- Investment Decision: Once the business firm has gained access to capital, the finance manager has to take a decision regarding the use of the funds in a systematic manner so that it will bring a maximum return for its owners. For this, the firm has to take into consideration the cost of capital. Once they know the cost of capital, the firm can deploy or use the funds in such a way that returns are more than the cost of capital.
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संबंधित प्रश्न
Write a word or a term or a phrase which can substitute the following statement.
A key determinant of success of any business function.
Write a word or a term or a phrase which can substitute the following statement.
The decision of finance manager which ensures that firm is well capitalised.
Business firm gives green signal to the project only when it is profitable.
State whether the following statement is true or false.
Corporate finance brings co-ordination between various business activities.
Find the odd one.
Complete the sentence.
When there is boom in economy, sales will ______
Complete the sentence.
During recession period sales will ______
Correct the underlined word and rewrite the following sentence.
Share is an acknowledgment of loan raised by company.
Explain the following term/concept.
Investment decision
Answer in brief.
Define capital structure and state it’s components.
Finance is the management of ______ affairs of the company.
Justify the following statement.
Finance Manager plays a vital role in Corporate Finance.
Explain the following term/concept in detail:
Corporate Finance
Arrange the terms in proper order:
- Investment decision
- Establishment of a firm
- Financing decision
Select the correct option from the bracket and complete the table:
(Funds for long-term, Rights issue, 36 months, Deploy funds in systematic manner, Charge on tangible assets)
| Group 'A' | Group 'B' | ||
| (a) | Investment decision | (1) | ____________ |
| (b) | ____________ | (2) | Shares offered to existing equity shareholders |
| (c) | Secured deposits | (3) | ____________ |
| (d) | ____________ | (4) | Maximum period of deposits |
| (e) | Capital market | (5) | ____________ |
Match the pairs:
| Group ‘A’ | Group ‘B’ | ||
| (a) | Capital budgeting | (1) | Unsecured Debenture |
| (b) | Regret Letter | (2) | 1956 |
| (c) | Board of Directors | (3) | Investment decision |
| (d) | Depository Act | (4) | Allotment of shares |
| (e) | Final Dividend | (5) | Decided and declared by Board of Directors |
| (6) | Financing decision | ||
| (7) | Decided by Board and declared by members | ||
| (8) | 1996 | ||
| (9) | Power to issue debentures | ||
| (10) | Non-Allotment of shares |
Business firm gives green signal to the project only when it is profitable.
Liberal credit policy creates a problem of bad debts.
