Corporate finance is used to describe activities, decisions and techniques that deal with many aspects of a company’s finances and capital. Every decision made in a business has financial implications, and any decision that involves the use of money is a corporate financial decision. Defined broadly, everything that a business does fits under the rubric of corporate finance. All businesses have to invest their resources wisely, find the right kind and mix of financing to fund these investments, and return cash to the owners if there are not enough good investments.
There is the accounting version of corporate finance, which uses the historical, rule-bound construct of accounting as the basis for corporate finance. Decision making is driven by accounting ratios and financial statements, rather than first principles. There is the banking version of corporate finance, where the class is structured around what bankers do for firms, with the bulk of the class being spent on areas where firms interact with financial markets (M&A, financing choices) and the focus is less on what's right for the firms, and more on how the deal making works.
Every discipline has first principles that govern and guide everything that gets done within it. All of corporate finance is built on three principles: the investment principle, the financing principle, and the dividend principle.
Valuation is an important concept in finance and plays a key role in decision making when choosing an investment for a portfolio, mergers, and acquisitions. In valuation practice, there are two primary models that valuation experts use namely discounted cash flow (DCF) and relative valuation (RV). The first method explain the estimates of intrinsic value and later method is more relying on the market and assume that the market is correct.
In discounted cash flow valuation the value of any company is the discounted value of expected future cash flows. In relative valuation, the value of any company can be found from the pricing of the comparable variables such as enterprise value, equity value, and share price. The variables are standardized using an appropriate variable such as earnings before interest, taxes, depreciation and amortization (EBITDA), the book value of equity, and earnings per share. The standardized variables or so-called multiples are then used to estimate the target company. The accuracy of discounted cash flow valuation and relative valuation are vital as it is the foundation for many financial decisions.
If yes, than you should acquire an educational background in MBA applied finance which should impart the following skills.
Now, let’s look into how can Corporate Finance and valuation skills help you in getting a job?
A job in the Corporate Finance and valuation is rewarding. I would like to highlight that corporate finance and valuation at this point is quite high in terms of job opportunities. If you’re looking to maintain your soundness, you will get paid well without selling your soul…