20 Corporate Finance Essentials
Welcome to 20 Corporate Finance Essentials! This guide is designed to help you understand the key concepts and practices of corporate finance in a conversational, relatable way. Whether you’re a business owner, manager, or simply interested in the world of finance, this resource will provide valuable insights and tips to enhance your understanding.
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Through personal testimonials and real-life examples, we’ll dive into the essentials of corporate finance, using an informal tone and direct address to engage with you. By the end, you’ll have a deeper understanding of important topics such as financial management, budgeting, investment strategies, risk assessment, and more.
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Corporate Finance: The division of finance dealing with how corporations deal with funding sources, capital structuring, and investment decisions.
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Capital Structure: The way a corporation finances its assets through a combination of debt, equity, and hybrid securities.
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Return on Investment (ROI): A measure used to evaluate the efficiency or profitability of an investment.
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Cost of Capital: The cost of funds used for financing a business, typically calculated as a weighted average of both debt and equity costs.
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Financial Modeling: The process of creating a summary of a company’s expenses and earnings in the form of a spreadsheet that can be used to calculate the impact of a future event or decision.
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Debt Financing: Raising capital through the sale of bonds, bills, or notes to individual and/or institutional investors.
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Equity Financing: The process of raising capital through the sale of shares in a company.
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Dividends: A distribution of a portion of a company’s earnings to a class of its shareholders.
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Mergers and Acquisitions (M&A): Aspects of strategic management dealing with the buying, selling, dividing, and combining of different companies and similar entities.
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Initial Public Offering (IPO): The first time a company offers shares of its stock to the public.
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Balance Sheet: A financial statement that reports a company’s assets, liabilities, and shareholders’ equity at a specific point in time.
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Income Statement: A financial statement that shows a company’s financial performance over a specific accounting period.
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Cash Flow Statement: A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources.
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Working Capital Management: The management of a company’s short-term assets and liabilities to ensure its financial operation is efficient and profitable.
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Financial Risk Management: The practice of protecting economic value in a firm by using financial instruments to manage exposure to risk.
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Leveraged Buyout (LBO): The acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition.
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Asset Management: The systematic process of developing, operating, maintaining, and selling assets in a cost-effective manner.
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Corporate Restructuring: The act of reorganizing a company’s structure, operations, or finances to increase its efficiency or profitability.
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Valuation: The process of determining the present value of an asset or company.
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Capital Budgeting: The process by which a business determines and evaluates potential expenses or investments that are large in nature.
These terms form the core language of corporate finance and are crucial for anyone involved in the financial management of corporations, whether in management, investment, consulting, or advisory roles.
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