The Every Day MBA

8

Finance 2: corporate finance and governance

We really can’t forecast all that well and yet we pretend that we can but we really can’t.

Alan Greenspan, quoted on The Daily Show, 2013¹

In a nutshell

Corporate finance is part of strategic thinking because collectively managers must assess, implement and evaluate a given course of future action in terms of its ability to create or destroy value. The most common metrics used to measure this are financial. In Part 2 we looked at finance in terms of reporting past performance, but this is not the same thing as valuing the business. A business is worth what it can be expected to do in the future. Corporate finance is about systematically choosing a course of action that will create value in ...