Corporate finance is concerned with the financing and investment decisions made by the management of companies in pursuit of corporate goals. As a subject, corporate finance has a theoretical base which has evolved over many years, and which continues to evolve as we write.
It has a practical side too, concerned with the study of how companies actually make financing and investment decisions, and it is often the case that theory and practice disagree.
The fundamental problem that faces financial managers is how to secure the greatest possible return in exchange for accepting the smallest amount of risk.
This necessarily requires that financial managers have available to them (and are able to use) a range of appropriate tools and techniques.
These will help them to value the decision options open to them and to assess the risk of those options.
The value of an option depends upon the extent to which it contributes towards the achievement of corporate goals.
In
corporate finance, the fundamental goal is usually taken to be to increase the wealth of
shareholders
