CHAPTER 1

Introduction: An Overview of Corporate Financial Management

Corporate financial management can be defined as the efficient acquisition and allocation of funds. The efficient acquisition of funds requires the firm to acquire funds at the lowest possible cost, and the efficient allocation of funds requires investing funds at the highest possible expected rate of return. If the firm acquires funds at the lowest possible cost and invests funds at the highest possible return, net cash flow to the firm will be maximized. The objective of corporate financial management is to maximize the value of the firm. The value of the firm is the market capitalization of the firm, which is the number of common equity shares times the price per share. ...

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