Capital Budgeting
Capital budgeting evaluates long-term investment opportunities and helps determine whether projects are financially worthwhile.
EZPOHUB FINANCE EDUCATION
Corporate Finance
Understand how businesses make investment, financing and financial management decisions using practical corporate finance concepts and analytical frameworks.
CORPORATE FINANCE
What is corporate finance?
Corporate finance focuses on how businesses make financial decisions. It considers how companies invest capital, obtain financing and manage financial resources.
Corporate finance decisions can affect profitability, risk, liquidity, growth and the long-term value of a business.
The major areas include investment decisions, financing decisions and working capital management.
CORE CORPORATE FINANCE TOPICS
The major areas of corporate finance
These concepts form the foundation of corporate financial decision-making.
Capital Structure
Capital structure considers the mix of debt and equity used to finance a company's activities and investments.
Required Return
The cost of capital represents the return required by providers of debt and equity capital.
Working Capital
Working capital management focuses on current assets, current liabilities, liquidity and short-term operations.
Risk and Return
Corporate finance involves balancing expected returns against financial and business risks.
Long-Term Decisions
Financial strategy connects investment, financing and operating decisions with the broader objectives of a business.
CAPITAL BUDGETING
Evaluating investment opportunities
Capital budgeting helps businesses evaluate projects that require significant investment over multiple periods.
Net Present Value
NPV compares the present value of expected project cash inflows with the initial investment.
Internal Rate of Return
IRR is the discount rate at which the net present value of a project equals zero.
Payback Period
Payback measures the time required for a project to recover its initial investment from its cash inflows.
Profitability and Risk
Investment decisions should consider expected returns, cash flows, risk and relevant assumptions.
COST OF CAPITAL
Understanding the cost of financing
Businesses use different sources of finance, and each source has an associated cost or required return.
Cost of Debt
Represents the effective cost associated with borrowing and debt financing.
Cost of Equity
Represents the return required by equity investors for providing capital to the business.
WACC
Weighted Average Cost of Capital combines relevant financing costs according to their capital weights.
CAPITAL STRUCTURE
Debt, equity and financial leverage
Capital structure refers to the combination of debt and equity financing used by a business.
Financial leverage can affect both potential returns and financial risk. The appropriate financing mix depends on the company's circumstances and strategy.
Key considerations
✓ Debt levels
✓ Equity financing
✓ Interest obligations
✓ Financial risk
✓ Cost of capital
✓ Business growth
WORKING CAPITAL MANAGEMENT
Managing short-term financial resources
Working capital management focuses on maintaining an appropriate balance between liquidity and operational efficiency.
Accounts Receivable
Businesses need to manage customer credit and collections to support cash flow.
Inventory Management
Efficient inventory management can help reduce unnecessary working capital requirements.
Accounts Payable
Managing supplier payment terms can affect both liquidity and relationships with suppliers.
FINANCIAL ANALYSIS
Connect corporate finance with financial analysis
Corporate finance decisions should be supported by financial information and analysis.
Financial Statements
Income statements, balance sheets and cash flow statements provide important information for analysis.
Financial Statement Analysis →Financial Ratios
Ratios can help evaluate liquidity, profitability, solvency and operating efficiency.
Finance Ratio Analysis →Finance Calculator
Use practical tools to calculate common financial ratios and support your analysis.
Finance Ratio Calculator →
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