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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.
The decision of finance manager which ensures that firm is well capitalised.
Write a word or a term or a phrase which can substitute the following statement.
The decision of finance manager to deploy the funds in systematic manner
State whether the following statement is true or false.
Corporate finance brings co-ordination between various business activities.
Find the odd one.
Answer in one sentence.
Define corporate finance.
Answer in one sentence.
What is production cycle?
Study the following case/situation and express your opinion.
The management of 'Maharashtra State Road Transport Corporation', wants to determine the size of working capital.
- Being a public utility service provider, will it need less working capital or more?
- Being a public utility service provider, will it need more Fixed Capital?
- Give one example of public utility service that you come across on day-to-day basis.
Study the following case/situation and express your opinion.
A company is planning to enhance it's production capacity and is evaluating the possibility of purchasing new machinery whose cost is 2 crore or has alternative of machinery available on lease basis.
- What type of asset is machinery?
- Capital used for purchase of machinery is fixed capital or working capital?
- Does the size of a business determine the fixed capital requirement?
Discuss the importance of corporate finance.
Business firm gives green signal to the project only when it is profitable.
Arrange the terms in proper order:
- Investment decision
- Establishment of a firm
- Financing decision
Business firm gives green signal to the project only when it is profitable.
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.
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.
Finance is the management of ______ affairs of the company.
