The Realm of Corporate Finance
Corporate Finance Revision List
Topic | Study Program | The Realm of Corporate Finance and Efficient Market Hypothesis | * Overview of finance’s main functions & its importance to organisations. * Importance of value creation as the primary objective of managers * Efficient Market Hypothesis (EMH) | Financial Statement Analysis | * Overview of calculating & interpreting accounting & financial ratios from corporate financial statements & understanding their significance in corporate finance. | Investment Appraisal Methods | * Main techniques used by firms in practice for evaluating investment opportunities. * how to estimate cash flows and how to deal with the problem of inflation | Long-term Financing Sources & Valuation | * Methods of raising equity capital, the cost of going public, common types of bonds issued by firms and the valuation of equity and debt securities. | Portfolio Theory & CAPM | * Relationship between risk & return * CAPM * Total Risk * Systematic Risk & Unsystematic Risk | The Cost of Capital & Capital Structure | * The choice of the mix of debt & equity used to finance a firm is known as the capital structure decision. * deciding upon the gearing level for the company. * Influential theories of gearing. * Factors influencing gearing decisions. | Payout Policy | * How companies determine what level of dividends should be paid out to shareholders. * Whether dividend policy is relevant to firm valuation. * Arguments in favour of high or low payouts. | Mergers & Takeovers | * How mergers & takeovers play a vital role in CF. |
The Realm of Corporate Finance
* Fundamental problem addressed by CF: how best to allocate the limited resource of money. * TWO key concepts in corporate finance:
1. Relationship between risk & return – With higher risk we require higher return
2. Time value of money – i.e. that £100 now is worth more than £100 in future due to, time, risk and
Topic | Study Program | The Realm of Corporate Finance and Efficient Market Hypothesis | * Overview of finance’s main functions & its importance to organisations. * Importance of value creation as the primary objective of managers * Efficient Market Hypothesis (EMH) | Financial Statement Analysis | * Overview of calculating & interpreting accounting & financial ratios from corporate financial statements & understanding their significance in corporate finance. | Investment Appraisal Methods | * Main techniques used by firms in practice for evaluating investment opportunities. * how to estimate cash flows and how to deal with the problem of inflation | Long-term Financing Sources & Valuation | * Methods of raising equity capital, the cost of going public, common types of bonds issued by firms and the valuation of equity and debt securities. | Portfolio Theory & CAPM | * Relationship between risk & return * CAPM * Total Risk * Systematic Risk & Unsystematic Risk | The Cost of Capital & Capital Structure | * The choice of the mix of debt & equity used to finance a firm is known as the capital structure decision. * deciding upon the gearing level for the company. * Influential theories of gearing. * Factors influencing gearing decisions. | Payout Policy | * How companies determine what level of dividends should be paid out to shareholders. * Whether dividend policy is relevant to firm valuation. * Arguments in favour of high or low payouts. | Mergers & Takeovers | * How mergers & takeovers play a vital role in CF. |
The Realm of Corporate Finance
* Fundamental problem addressed by CF: how best to allocate the limited resource of money. * TWO key concepts in corporate finance:
1. Relationship between risk & return – With higher risk we require higher return
2. Time value of money – i.e. that £100 now is worth more than £100 in future due to, time, risk and