Finance

1. WHY IS CORPORATE FINANCE IMPORTANT TO ALL MANAGERS

The primary goal of corporate finance is to maximise shareholder value. Corporate finance deals with the financial decisions companies and businesses make and the tools and analysis used to make those decisions (Beal, Goyen, Shamsuddin 2005, pp 4 -7).

The three important functions within a firm are:

• Making investment decisions also known as capital budgeting decisions;

• Making decisions on how to finance such investments known as capital structure decisions; and

• Managing funding for the company’s daily operations known as working-capital management.

Every firm’s goal is to maximise shareholder wealth which in turn would result in the maximisation of the market value of the existing shareholders ordinary values (Beal, Goyen, Shamsuddin 2005, pp 8 – 9). Corporations and companies that are structured effectively and sufficiently maximise shareholder growth and value, become popular choices of investment opportunities for large firms looking to invest, consequently further increasing the value of the corporation and/or company.

For this reason, corporate finance is extremely important to all managers, as the managers responsibilities and goals are similarly to maximise shareholder wealth, as this is their main employment obligations within the firm.

2. OVERRIDING OBJECTIVE

Senior management want the organization to attain the organization’s goal. But the individual members of the organization have their own personal goals (Anthony, Govindarajan 1916, pg 98). However, Michael and his colleague’s were efficient workers and they achieved their individual goals and Computer Products Limited profitability increased 3% but company’s share price decreased from $22 to $15 in last 10 months.

The main objective for management to make a goal and maximise wealth for the firm but Account and Finance Department of Computer Product Limited could not use the financial methods and tools efficiently and...