Corporate Finance
written by: William F Bryant Corporate Finance was developed from a theoretical perspective on the valuation of corporations and how use of debt and equity may affect the value. If you have ever went through a merger or acquisition, attempted to derive fair value for a stock or even structured a bond offering you may be familiar with some of the aspects of a valuation that were develop thanks to the pursuance of the theory. In fact, finance is almost entirely focused upon rates of interest and, by extension, valuing anything and everything that will affect the overall value of the business. We do not have to delve into the theory to understand that what arose was financial management and the desire to use the tools to increase the firm’s value strictly from a proper organizing and efficient usage of the financial structure. This financial structure both influences and is sourced from the size, timing and risk associated with the expected cash flows of your business operations. These cash flows will vary dependent upon things like corporate designation (C-corp, S-corp, LLC, Sole Proprietorship) and effective tax rate, your credit terms received and offered from suppliers and to customers, your capital structure, budgetary and working capital management, future financing of projects and strategy, marketing, R&D and so on. You may be thinking it is all straight forward, cash comes in and cash goes out, but the takeaway isn’t that the structure is sourced its that the structure offers influence over the size, timing and risk of the cash flows. Financial management proposes the influential strategies. |
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