Corporate Financial Management

Corporation is a form of business organization. Among three alternative forms (sole proprietorship, partnership and corporation) of business organization corporation is a kind. Not all business organizations are corporations. Small venture can be owned and managed by single individual these are called sole proprietorships. In other cases, several people may join to own and manage a partnership. Almost all large and medium-sized businesses are organized as corporations. For example: Nepal Bank Ltd., Sagarmatha Insurance Co. Ltd., Lumbini Finance and Leasing Co. Ltd. etc. The following are basic characteristics of corporation:

• Shares of stock represent ownership in a corporation.
• Ownership can easily be transferred to new owner.
• The corporation has unlimited life.
• Shareholders have limited liability.
• The most important characteristic of corporation is the management of corporation is always separate from its owner.

Corporate financial management is defined as the process of financial decision making in the corporation to maximize the shareholders’ wealth. Corporate financial management deals with an understanding of the concepts and principles of finance along with the knowledge of the analytical techniques for developing skills in their application required for making investment, financing and dividend decisions.

In a competitive market place, business must actively manage their funds to achieve their goals. Many tools and techniques have been developed to assist financial managers to recommend proper courses of action. These tools help the managers to determine which sources offer the lowest cost of fund and which activities will provide the greatest return on invested capital. Financial management is the field of greatest concern to the corporate financial officers and will be the major thrust of the approach that we will use in studying finance.