Corporate Finance Definition

Corporate Finance → Definition

To start a firm you need to make an investment in assets such as inventory, machinery, land and labor. This is called investment decision. And, you can finance your investment by borrowing and selling some shares of the firm. This is called financing decision. And, when your firm begins operation, it will generate cash. This is the basis of value creation. The purpose of the firm is to create value for the owner.

Corporate Finance is the study of investment and financing decision making, and how should a firm manage its short-term operating cash flows in order to increase the value of the firm to the owner.