Question

Corporate Finance

1. (10 points) Address the relationship between corporate finance and financial markets.

Answer 1

Corporate finance is the division of a company that deals with financial and investment decisions.It is primarily concerned with maximizing shareholder value through long term and short term financial planning and the implementation of the various strategies.It mainly deals with sources of the funding, capital structure of corporations etc.Thus it covers the investing and financing activities of a company. While financial markets are the markets in which people trade in financial securities and derivatives such as futures and options at low transaction cost. Securities include stocks , bonds and precious metals. Hence financial market is a broad term for describing any market place where buyers and sellers participate in trade of assets such as equities ,bonds , currencies and derivatives etc