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Introduction To
Business/Corporate Finance
Overview
In this lecture we will discuss
The nature of business/corporate finance;
The nature of financial markets;
The corporate objective;
Corporate financial decisions;
Critical factors in financial decision-making;
Valuation of a firm and real and financial
assets; &
Finance vs. accounting
RMIT University2008
Business/Corporate Finance
What Is Business/Corporate Finance?
Corporate Finance is a body of knowledge which
focuses on explaining and interpreting financial markets. It
provides an analytical framework to guide managers of
firms and to assist them to evaluate corporate financial
decisions.
(Bishop, Crapp, Faff and Twite , 1993)
RMIT University2008
Financial Markets
What is a Financial Market?
A medium for the issue and exchange of
financial assets.
Australian financial market includes:
The big four banks (and all other
banks/building societies/savings & loans
operating in Australia)
The Australian Stock Exchange (ASX)
The Australian government bond market
RMIT University2008
Financial Markets
Financial markets - bring together the buyers and sellers of debt
and equity securities.
The financial market is made up of:
Money market - involves the trading of short-term debt securities;
&
Capital market - involves the trading of long-term debt securities
and equity securities.
The money market and the capital market are each made up of:
Primary market - involves the original sale of securities (IPOs to
raise finance); &
Secondary market - involves the continual buying and selling of
already issued securities (for profit & loss).
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Cash
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Time
Risk
15
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Liabilities (Debt)
$13.134b
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