Corporate finance

Use of the term “corporate finance” varies considerably across the world. In the United Kingdom and Commonwealth countries, the term “corporate finance” tends to be associated with investment banking, i.e. with transactions in which capital is raised for the corporation. These may include raising seed, start-up, development or expansion capital, mergers, demergers, acquisitions or the sale of private companies, equity issues by companies, including the flotation of companies on a recognised stock exchange in order to raise capital for development or to restructure ownership. On the other hand in the United States it is used to describe activities, decisions and techniques that deal with many aspects of a company’s finances and capital.

Capital investment decisions are long-term corporate finance decisions relating to fixed assets and capital structure. Management must allocate limited resources between competing opportunities or projects in a process known as capital budgeting. Making this investment, or capital allocation, decision requires estimating the value of each opportunity or project, which is a function of the size, timing and predictability of future cash flows.

In many cases, for example R&D projects, a project may open or close the paths of action to the company, but this reality will not typically be captured in a strict NPV approach. Management will therefore employ tools which place an explicit value on these options. The two most common tools are Decision Tree Analysis (DTA) and Real options analysis (ROA). They may often be used interchangeably.

7. Review the terminology of the text:

движение денежной наличности, анализ реальных возможностей, быть взаимозаменяемыми, проекты НИОКР, реконструировать право собственности, капитал на расширение, стоимость возможности, основной капитал, решения по капитальным вложениям, финансы корпорации, страны Содружества, разделение, анализ дерева решений.

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