Corporate finance — definition?
Managing resources to maximize shareholder value.
Role of corporate finance?
Secure funds and optimize resource use.
Balance sheet — structure?
Assets = claims; assets classified into current and fixed.
Assets — types?
Current and fixed assets.
Liabilities — division?
Current liabilities and long-term debt.
Equity — components?
Shareholders’ residual interest, including retained earnings.
Financial ratios — purpose?
Assess performance, valuation, and efficiency.
ROCE — meaning?
Efficiency in generating profits from capital employed.
PER — what?
Price-to-earnings ratio, valuation indicator.
EPS — calculation?
Net income divided by shares outstanding.
Investment analysis — focus?
Evaluating long-term projects via cash flows.
Capital budgeting — process?
Selecting projects to maximize value.
NPV — rule?
Accept if positive; adds value.
Cost of capital — includes?
Debt and equity costs, weighted as WACC.
WACC — formula?
Weighted average of debt and equity costs.
Time value of money — principle?
Money today is worth more than in future.
PV — what?
Present value of future cash flows.
FV — what?
Future value of current cash invested.
Discounting — mechanism?
Converts future cash to present value.
Capital structure — decisions?
Balance between debt and equity financing.
Test your knowledge with 10 questions on Fundamentals of Corporate Finance and Valuation.
1. What is the primary focus of corporate finance?
2. According to the balance sheet structure described in the course, which of the following best defines current assets?
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