Capital budgeting Decisions

Risk and Return

Risk includes the possibility of losing some or all of the original investment. 

Types of risk:

Business risk
Financial risk
Portfolio or market risk

Financial Markets

The Financial Market is a broad term describing any marketplace where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives.

Financial Market promotes savings and investments and provides a mechanism that requirements of  lender and borrowers are met.

Time value of money

The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.



This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received.

Introduction

Corporate finance is all about the finance of companies. 

Corporate finance is the area of finance dealing with the sources of funding and the capital structure of corporations and the actions that managers take to increase the value of the firm to the shareholders, as well as the tools and analysis used to allocate financial resources.