{"id":6417,"date":"2021-09-19T10:57:14","date_gmt":"2021-09-19T05:27:14","guid":{"rendered":"https:\/\/scholarsclasses.com\/blog\/?p=6417"},"modified":"2025-10-07T20:00:08","modified_gmt":"2025-10-07T14:30:08","slug":"meaning-of-corporate-finance","status":"publish","type":"post","link":"https:\/\/scholarsclasses.com\/blog\/meaning-of-corporate-finance\/","title":{"rendered":"Meaning of Corporate Finance | 2 Decisions that are the Basis of Corporate Finance"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"576\" data-src=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Corporate-Finance-1024x576.jpg\" alt=\"Meaning of Corporate Finance\" class=\"wp-image-6444 lazyload\" title=\"\" data-srcset=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Corporate-Finance-1024x576.jpg 1024w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Corporate-Finance-300x169.jpg 300w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Corporate-Finance-768x432.jpg 768w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Corporate-Finance-1536x864.jpg 1536w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Corporate-Finance-640x360.jpg 640w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Corporate-Finance.jpg 1920w\" data-sizes=\"(max-width: 1024px) 100vw, 1024px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1024px; --smush-placeholder-aspect-ratio: 1024\/576;\" \/><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d768bfe97f0\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d768bfe97f0\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-corporate-finance\/#Meaning_of_Corporate_Finance\" >Meaning of Corporate Finance<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-corporate-finance\/#Finance\" >Finance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-corporate-finance\/#Meaning_of_Corporate_Finance-2\" >Meaning of Corporate Finance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-corporate-finance\/#Definition_of_Corporate_Finance\" >Definition of Corporate Finance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-corporate-finance\/#2_Decisions_that_are_the_Basis_of_Corporate_Finance\" >2 Decisions that are the Basis of Corporate Finance<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-corporate-finance\/#1_Financing_Decision\" >1) Financing Decision<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-corporate-finance\/#2_Investment_Decision\" >2) Investment Decision<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading has-text-align-center\"><span class=\"ez-toc-section\" id=\"Meaning_of_Corporate_Finance\"><\/span><strong>Meaning of Corporate Finance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Finance\"><\/span><strong>Finance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The term finance is related to money and money management. It is related to inflow and outflow of money. The success of any business organization depends upon the efficiency with which it is able to generate and use funds.<br><strong><em>Henry Ford<\/em><\/strong> rightly said, \u201c<em><strong>Money is an arm or leg &#8211; use it or lose it<\/strong><\/em>.\u201d This statement clearly brings out the significance of finance for the success of a business.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/public-deposits-meaning\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/public-deposits-meaning\/\" target=\"_blank\" rel=\"noreferrer noopener\">Public Deposit <\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/gdr-meaning\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/gdr-meaning\/\" target=\"_blank\" rel=\"noreferrer noopener\">Global Depository Receipt (GDR)<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/features-of-shares\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/features-of-shares\/\" target=\"_blank\" rel=\"noreferrer noopener\">Features of Shares<\/a><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meaning_of_Corporate_Finance-2\"><\/span><strong>Meaning of Corporate Finance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><strong>Corporate finance deals with the raising and using of finance by a corporation. It deals with financing the activities of the corporation, capital structuring, and making investment decisions.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Definition_of_Corporate_Finance\"><\/span><strong>Definition of Corporate Finance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><strong><em>Henry Hoagland<\/em><\/strong> expresses the view that \u2018\u2018<strong><em>corporate finance deals primarily with the acquisition and use of capital by a business corporation.<\/em><\/strong>\u2019\u2019<\/p>\n\n\n\n<p>The term <a href=\"https:\/\/www.icaew.com\/technical\/corporate-finance\/corporate-finance-faculty\/what-is-corporate-finance\" data-type=\"link\" data-id=\"https:\/\/www.icaew.com\/technical\/corporate-finance\/corporate-finance-faculty\/what-is-corporate-finance\" target=\"_blank\" rel=\"noopener\">corporate finance<\/a> also includes financial planning, the study of capital market, money market, and share market. It also covers capital formation and foreign capital. Even financial organizations and banks play a <a href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/\" target=\"_blank\" rel=\"noreferrer noopener\">vital role in corporate financing<\/a>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Decisions_that_are_the_Basis_of_Corporate_Finance\"><\/span><strong>2 Decisions that are the Basis of Corporate Finance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Financing_Decision\"><\/span><strong>1) Financing Decision<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The business firm has access to the capital market to fulfill its financial needs. The firm has multiple choices of sources of financing. The firm can choose whether it wants to raise equity capital or debt capital. A firm can even opt for a bank loan, public deposits, debentures, etc. to raise funds. The finance manager ensures that the firm is well capitalized i.e. they have right amount of capital and that the firm has the right combination of debt and equity.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Investment_Decision\"><\/span>2) Investment Decision <span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Once the business firm has gained access to capital, the finance manager has to take a decision regarding the use of the funds in systematic manner so that it will bring maximum return for its owners. For this, the firm has to take into consideration the cost of capital. Once they know the cost of capital, firm can deploy or use the funds in such a way that returns are more than cost of capital.<\/p>\n\n\n\n<p>Finding investments and deploying them successfully in the business is known as investing decision. It is also called as \u2018capital budgeting\u2019.<\/p>\n\n\n\n<p><strong><em><span class=\"has-inline-color has-vivid-red-color\">Capital market is a market for long term debt instruments and equity shares. In this market, equity and debt instruments are issued and traded.<\/span><\/em><\/strong><\/p>\n\n\n\n<p><strong><em><span class=\"has-inline-color has-vivid-red-color\">Cost of capital is minimum return expected by it\u2019s investors.<\/span><\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#46;&#46;&#46;<\/p>\n","protected":false},"author":1,"featured_media":6444,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[2500],"class_list":["post-6417","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-misc","tag-meaning-of-corporate-finance"],"_links":{"self":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6417","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/comments?post=6417"}],"version-history":[{"count":2,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6417\/revisions"}],"predecessor-version":[{"id":39334,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6417\/revisions\/39334"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media\/6444"}],"wp:attachment":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media?parent=6417"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/categories?post=6417"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/tags?post=6417"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}