corporate finance

M.IshfaqCourse CoordinatorRiphah University,Faisalabad Campus.

MS (Finance)Having 5 Year Teaching Experience.

What is Finance?

Finance deals with matters related to Money

and the Markets.

Corporate Finance

Corporate finance is the area of finance dealing with the

• Sources of funding and the capital structure of corporations

• As well as the tools and analysis used to allocate financial resources.

• Management Of Assets.

The primary goal of corporate finance.

1.Maximize or increase shareholder value. 2.Corporate Social Responsibility. 3.Eliminate Agency Problem.

Sources of funding and the capital structure of corporations

Tools and analysis used to allocate financial resources.

Management Of Assets.

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Flows of funds and decisions important to the financial manager

Financial Manager

Financial Markets

Real Assets

Role of Financial Manager

• Capital Budgeting Decision• Financing Decision

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Finance Questions in a Corporate Context (i.e., corporate finance)

1. Where will you get the long-term financing to invest?– Bring in other owners (issue equity/stocks)– Borrow (issue debt/bonds)

2. What long-term investments should be undertaken– Buildings– Machinery – Equipment– Research and development (R&D)

3. How will you manage the company’s short-term cash flow? – Collecting from customers– paying suppliers

Financial Market

• Marketplace where buyers and sellers participate in the trade of assets such as equities, bonds, and currencies.

Types of Financial Market

• Money Market• Capital Market

Types of Financial Market

• Money Market

Market for short-term debt securities, such as Treasury Bills,Commercial paper, negotiable certificates of deposit, and with a maturity of one year or less and often 30 days or less.

Instruments of Money Market

• Treasury Bills• Commercial Paper• Negotiable Certificate of Deposits• Repurchase Agreement

Functions of Money Market

1. Financing Trade Money Market plays crucial role in financing

both internal as well as international trade. Commercial finance is made available to the traders through bills of exchange, which are discounted by the bill market

Functions of Money Market

2. Financing Industry Money market helps the industries in securing

short-term loans to meet their working capital requirements through the system of finance bills, commercial papers, etc.

Functions of Money Market

3. Profitable Investment Money market enables the commercial banks

to use their excess reserves in profitable investment. In the money market, the excess reserves of the commercial banks are invested in near-money assets .

• Help to Central Bank Treasury Bills (Issued on Discount Basis)

– Sold on discount basis.– Maturities up to one year.

Types of Financial Market

• Capital MarketIt is a Market where Long Term

Obligations are Traded.

Two types of Capital MarketPrimary MarketSecondary Market

Primary Market

• A market where new shares are issued.

IPO IPO provides new Ownership Opportunity

Secondary Market

• A market where already issued shares are Traded.

Instruments of Capital Market

• Common Shares • Preferred Stock• Bonds

Instruments of Capital Market

• Common Shares Ownership Transfer Dividend Payment Right Of Common Share Holders

Instruments of Capital Market

• Preferred Stock Not issued in Pakistan after 1984 Dividend Fix Accumulated Right Convertible into Common Stocks

Instruments of Capital Market

• Bonds Fixed Maturity Fixed Copan rate Callable