Introduction To Corporate Finance:
A division or department that oversees the financial activities of a company. Corporate finance is primarily concerned with maximizing shareholder value through long-term and short-term financial planning and the implementation of various strategies. Everything from capital investment decisions to investment banking falls under the domain of corporate finance. Corporate finance is the funding provided to support the operations of the venture itself, as distinct from project finance which is provided for developing and producing individual film projects. The main sources of corporate finance are: Debt: money borrowed from a lender and secured against certain assets of the company in return for a promise to pay interest on the outstanding amount and to repay the principal of the loan on or before an agreed date. The rate of interest charged will usually depend upon the term of the loan and whether the principal is to be paid in instalments throughout the term or in a lump sum payment at the agreed maturity date. Lenders tend to be risk averse and are looking for solid evidence of the lenders ability to re-pay the interest and principal as agreed. They should be kept informed at all times of any issues relating to the ability of the company to repay the debt. Equity: shares in the ownership of the company acquired at the risk of the purchaser and not secured on the company's assets; any return will be in the form of a share of the profits made by the company. Equity investors will want to be assured that the company has solid growth prospects and a sound business plan. They will also need to see a clear exit strategy explaining how they will recoup their investment (and ideally a significant profit) in due course. Quasi-equity: other forms of shares such as preference shares and convertible shares which pay a fixed dividend but do not convey any voting or management rights on the owner. Convertible shares can be exchanged for ordinary voting shares subject to certain conditions specific to each investment situation. Other funding: for example central government grants or other local support funds to encourage investment in a particular sector or location. Each of these sources of funding has a different risk and return profile. The greater the risk carried by the financier, the higher the return that they should receive for committing their funds. Equity investors will seek a greater return than lenders because of the greater risk that they carry. Role of Finance Manager:
THE HISTORY OF FAILURES OF ORGANISATIONS IS INTERESTING. MANY FIRMS HAVE FAILED, NOT BECAUSE OF INEFFICIENCY OF PRODUCTION, INABILITY IN MARKETING OR NONAVAILABILITY OF FUNDS BUT DUE TO THE ABSENCE OF COMPETENT FINANCE MANAGER. * Finance Manager has to find out from where can raise the fund. * Finance Manager has to think about the investment decision. * Finance Manager has to make financial forecasting.
* Finance Manager has to maintain the liquidity position of the firm. * Capital Budgeting decision.
* Dividend decision
* Working Capital management
* Cash Management
* Risk Management , Risk Diversification
* Portfolio Management
Finance manager handling other dept’s:
* Finance and Production.
* Finance and HRM
* Finance and Marketing
* Finance and R&D
* Finance and CSR
Duties of Finance manager:
* Merger and acquisition
* Valuation of share and the assets
* International Finance Management
* Implication of Govt taxation, interest policy
* Understanding the role of intermediaries in finance
* Analyzing the financial health of the organization
* Preparing Budget for production, marketing and finance deptt. * Managing payment and receivable.
* Framing the credit policy.
* Deciding regarding the source of finance
* Depreciation and replacement decision
* Hedging and insurance decision.
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