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Corporate finance

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Definition of Corporate finance

Corporate Finance Image 1

Corporate finance

One of the three areas of the discipline of finance. It deals with the operation of the firm
(both the investment decision and the financing decision) from that firm's point of view.



Related Terms:

Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees

A committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial
reporting environment in the United States. In a report dated February 1999, the committee
made recommendations for new rules for regulation of financial reporting in the United States that
either duplicated or carried forward the recommendations of the Treadway Commission.


Corporate acquisition

The acquisition of one firm by anther firm.


Corporate bonds

Debt obligations issued by corporations.


Corporate charter

A legal document creating a corporation.


Corporate financial management

The application of financial principals within a corporation to create and
maintain value through decision making and proper resource management.



Corporate financial planning

Financial planning conducted by a firm that encompasses preparation of both
long- and short-term financial plans.


Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.


Corporate Finance Image 2

Corporate tax view

The argument that double (corporate and individual) taxation of equity returns makes
debt a cheaper financing method.


Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.


External finance

finance that is not generated by the firm: new borrowing or a stock issue.


Finance

A discipline concerned with determining value and making decisions. The finance function allocates
resources, which includes acquiring, investing, and managing resources.


Finance Company

Company engaged in making loans to individuals or businesses. Unlike a bank, it does not receive deposits from the public.


Internal finance

finance generated within a firm by retained earnings and depreciation.


International finance subsidiary

A subsidiary incorporated in the U.S., usually in Delaware, whose sole
purpose was to issue debentures overseas and invest the proceeds in foreign operations, with the interest paid
to foreign bondholders not subject to U.S. withholding tax. The elimination of the corporate withholding tax
has ended the need for this type of subsidiary.


Offshore finance subsidiary

A wholly owned affiliate incorporated overseas, usually in a tax haven country,
whose function is to issue securities abroad for use in either the parent's domestic or its foreign business.


Turnover

Mutual Funds: A measure of trading activity during the previous year, expressed as a percentage of
the average total assets of the fund. A turnover ratio of 25% means that the value of trades represented onefourth
of the assets of the fund. finance: The number of times a given asset, such as inventory, is replaced
during the accounting period, usually a year. corporate: The ratio of annual sales to net worth, representing
the extent to which a company can growth without outside capital. Markets: The volume of shares traded as a
percent of total shares listed during a specified period, usually a day or a year. Great Britain: total revenue.



 

 

 

 

 

 

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