Why is corporate finance important for all managers? Corporate finance is a specific field of finance dealing with the financial decisions that businesses make and the tools and analytics used to make those decisions. The main objective of corporate finance is to increase the value of the company, without taking excessive financial risks. The primary responsibility of a company's management is to maximize shareholder wealth, which results in maximizing stock price. Corporate finance provides the skills managers need to: Identify and select business strategies and individual projects that add value to their business - Capital budgeting  Forecast their business's financing needs and design strategies to acquire these funds - Capital Structure Proper capital structure is a critical decision for any business organization. The decision is important not only because of the need to maximize returns for the organization's various stakeholders, but also because of the impact such a decision has on an organization's ability to cope with its competitive environment. Capital budgeting is the planning process used to determine a company's capital budget. long-term investments such as new machines, replacement machines, new factories, new products and research and development projects. Many formal methods are used in capital budgeting, including discounted cash flow techniques such as net present value, internal rate of return using incremental cash flows from each potential investment or project. Describe the organizational forms a business might have as it evolves from a startup to a mayor's corporation. List the advantages and disadvantages of each form. A start-up company implies that companies that have been in business...... middle of paper ...... res are not guaranteed and are only paid at the discretion of the directors if the company made a profit. Interest on bonds is legally payable regardless of profit or loss, but of course if the company goes bankrupt there will be no return. An obligation by which an investor agrees to lend money to a company or government in exchange for a predetermined interest rate. If a business wants to expand, one of its options is to borrow money from individual investors. The company issues bonds at different interest rates and sells them to the public. Stock prices are a better indicator than corporate bond prices because they are widely available and more accurate. Equity is particularly important for margin accounts, for which minimum standards must be met. For example; an investor may prefer to invest in stocks rather than bonds. This is also called equity security.