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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
Match the pairs.
| Group ‘A’ |
Group 'B' |
|
a) Capital budgeting |
1) Sum of current assets |
|
b) Fixed capital |
2) Deals with acquisition and use of capital |
|
c) Working capital |
3) Fixed liabilities |
|
d) Capital structure |
4) Sum of current liabilities |
|
e) Corporate finance |
5) Fixed assets |
|
|
6) Investment decision |
|
7) Financing decision |
|
|
8) Deals with the acquisition and use of assets |
|
|
9) Mix-up of various sources of funds |
|
|
10) Product mix |
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.
State whether the following statement is true or false.
Corporate finance brings co-ordination between various business activities.
Complete the sentence.
When there is boom in economy, sales will ______
Answer in one sentence.
Define corporate finance.
Correct the underlined word and rewrite the following sentence.
Finance is needed to pay dividend to debenture holders.
Correct the underlined word and rewrite the following sentence.
When there is recession in economy sales will increase.
Explain the following term/concept.
Financing decision
Finance is the management of ______ affairs of the company.
Justify the following statement.
Finance Manager plays a vital role in Corporate Finance.
Business firm gives green signal to the project only when it is profitable.
Match the pairs:
| Group 'A' | Group 'B' | ||
| (a) | Capital budgeting | 1) | Problem faced in physical mode |
| (b) | Interest on registered debentures | 2) | Decided and declared by the Board of Directors |
| (c) | Bad delivery | 3) | Trading of financial securities |
| (d) | Final dividend | 4) | Trading of commodities |
| (e) | Financial market | 5) | Interest warrant |
| 6) | Investment decision | ||
| 7) | Problem faced in electronic mode | ||
| 8) | Financing decision | ||
| 9) | Interest coupons | ||
| 10) | Decided by the Board and declared by the members | ||
Business firm gives green signal to the project only when it is profitable.
Business firm gives green signal to the project only when it is profitable.
Business firm gives green signal to the project only when it is profitable.
Liberal credit policy creates a problem of bad debts.
Finance is the management of ______ affairs of the company.
Finance is the management of ______ affairs of the company.
