Corporate finance

Corporate finance is the study and practice of how companies raise, invest, and manage money. It centers on financing decisions, investment choices, and the distribution of returns to capital providers.

Capital budgeting: The process of evaluating and selecting long-term investments by comparing their expected costs and benefits. It governs which projects receive the company’s scarce capital.
Discounted cash flow: A valuation method that estimates present value by discounting expected future cash flows. It translates a project’s projected cash flows into a value for capital budgeting.
Initial public offering: A company’s first sale of shares to public investors on a stock exchange. It is a major route for raising equity capital and changing ownership.
Personal finance: The management of an individual’s or household’s income, spending, saving, borrowing, and investing. It shares financial tools but centers household goals rather than company value and obligations.
Corporate governance: The systems and rules through which companies are directed, monitored, and held accountable. It shapes who oversees financial decisions and whose interests those decisions serve.
Capital structure: The mix of debt and equity a company uses to finance its operations and investments. It describes the financing mix corporate finance seeks to choose.
Net present value: The present value of expected cash inflows minus the present value of expected outflows. It gives a decision rule for accepting or rejecting investments.
Mergers and acquisitions: Transactions that combine companies or transfer control of one company to another. They apply valuation and financing decisions to corporate control and expansion.
Public finance: The study of government revenue, expenditure, borrowing, and their effects on the economy. It concerns public budgets and social objectives rather than company financing decisions.
Agency problem: A conflict arising when an agent’s interests differ from those of the person or group they represent. It explains why managers’ financial choices may diverge from shareholders’ interests.

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