Articles on Corporate Finance

What is Corporate Finance? – Meaning and Important Concepts

Corporate finance is one of the most important subjects in the financial domain. It is deep rooted in our daily...

Nominal and Real Value of Money

The previous article was an introduction about the two basic decisions that corporate finance helps a corporation in making. Prima-facie,...

Two Fundamental Rules of Corporate Finance

Corporate finance is based on two fundamental rules. All tools and techniques of corporate finance are mere ways and means...

Present Value and Future Value of Money

Value of Money Depends Upon Time In the previous article we learned about the concept of nominal and real values...

Net Present Value Calculations

The net present value (NPV) is the most important concept in corporate finance. It is on the basis of this...

Compounding Intervals and Interest Rate

Theoretically there are two types of interest rates, simple and compounding. However, in finance the word interest usually refers to...

What Are Negative Interest Rates ?

The Bank of Japan has recently decided that it will cut its rate below the zero percent mark. Bank of...

The Consequences of Negative Interest Rates

Warren Buffet once told that interest rates are like gravity. If there is no gravitational pull on asset values, then...

Opportunity Cost of Capital – Alternate Uses of Money

Opportunity cost of a capital is a term unique to economics and finance. It is unique in the sense that...

Valuing Cash Flows in Different Periods

Cash flows vary from project to project. In some cases cash flows will occur evenly over time. There might be...

What is Perpetuity? – Make Smarter Investment Decisions

Perpetuity is a very important concept in corporate finance. The concept of perpetuity makes it possible to value stocks, real...

Growing Perpetuity

We have seen that a perpetuity represents an infinite stream of future cash flows. However, we have also seen that...

What is Annuity? – Meaning and Concept

An annuity, just like a perpetuity, is a shortcut used while making present value calculations. Unlike the perpetuity, which is...

Ordinary Annuity vs. Annuity Due

Annuities can be divided into two types based on the exact time when the payments occur in a given period....

Different Types of Annuity Calculations

In the articles on present value, we learnt that the value of a dollar today is not the same as...

What is Bond Valuation and How is it Calculated ?

One of the Most Important Uses of Discounting The present value of a bond is the sum of all the...

Bond Market Conventions

While calculating present values of bonds, one may observe that some of the information required to compute the present value...

How Changes in Interest Rates Affect Bonds ?

Interest rates are one of the most important factors while determining the bond value. All other factors like payments, number...

Common Stock Valuation: The Two Approaches

Ever since the inception of corporation as a separate legal entity, the common stock has become one of the most...

Stock Valuation – The Discounted Cash Flow Approach in Detail

In the past article we have seen how Discounted Cash Flow (DCF) is the most appropriate method of stock valuation...

Assumptions Made During Stock Price Valuation

Estimating the value of equity stock of a company is not an easy proposition. This is because while estimating the...

What is Cost of Equity? – Meaning, Concept and Formula

Theoretical Concept The cost of equity concept is very important when it comes to valuing shares on the stock market....

What is Payback Period ?

We have earlier discussed the fact that Net present Value (NPV) is considered to be the gold standard when it...

What is Internal Rate of Return (IRR) ?

The Internal Rate of Return (IRR) is another very important metric that can be used to determine whether or not...

Problems With Using Internal Rate of Return (IRR) for Investment Decision Making

In the past article we discussed about the concept of internal rate of return. We discussed how it could be...

Capital Rationing and Profitability Index

In the previous few articles we have come across different metrics that can be used to choose amongst competing projects....

Types of Capital Rationing

As discussed in the previous article, capital rationing is a form of capital budgeting. In capital rationing we change the...

Capital Controls: Meaning, Types, Benefits and Downside

What are Capital Controls ? Capital controls are when the governments of nations restrict the inflow and outflow of capital...

Estimating Project Cash Flows: Part 1

Prima facie, capital budgeting may seem like a very simple task. After all, it has just 3 steps. The first...

Estimating Project Cash Flows: Part 2

We have seen in the previous article that estimating cash flows can be quite confusing and counterintuitive. This is not...

Estimating Project Cash Flows: Part 3

Continuing from the previous two articles, we will look at some more counterintuitive steps that need to be taken to...

Capital Budgeting and the Treatment of Inflation

Forecasts Spread Over a Period of Time Inflation is an ever persistent condition in today’s economy. The purchasing power of...

Capital Budgeting and Depreciation

Depreciation is an important concept in capital budgeting. This is because it is a non cash expense and ideally should...

Equivalent Annual Costs

In the previous articles we have seen how we can convert a possible future stream of cash flows to its...

Separation of Investing and Financing Decisions

We have already seen that there are a lot of differences that arise between what we have learned in accounting...

Getting Creative with Capital Budgeting

From the past few articles, it may seem like capital budgeting has a pre-determined procedure. All the possible scenarios that...

The Fallacy of Creative Destruction

There is a widely held view that creative destruction is the cause of all business cycles. This explanation is used...

Companys Risk vs. Project Risk

In the past module, we concentrated on calculating the returns part of the project. All our articles were focused on...

How Governments around the World are Bankrupting Future Generations for Present Consumption

The Debt Bomb and its Implications The world is in crisis and one of the reasons for that is the...

How Do Funds Transfer Systems Work

Domestic Funds Transfer It is common for individuals and entities to transfer funds to their friends, family, business partners, and...

The Importance of KYC (Know Your Customer) Norms and Procedures in Banking

Follow the Money Trail In recent months, there has been a spate of disclosures around the world about how banks...

Difference between Corporate, Retail, Investment Banking, and Private Banking

The Difference between Retail, Corporate, and Investment Banking Most of us when dealing with banks usually walk into the branch...

Impact of Geography on Banking and its Functions

Why Geography matters for Banking With the world economy being integrated and interconnected due to the process of globalization, the...

Functions of a Central Bank in Modern Economies

A central bank is an institution that is mandated by constitutional decree to function along certain principles and entrusted with...

Lease Rental Discounting

Many corporations and individuals earn a significant portion of their income from rents that they derive from their immovable properties....

Lending Against Intangible Assets

Business and personal lending is dominated by tangible assets. The simple reason behind this is that they make good collateral....

Real Reasons behind FDI in Retail in India

A couple of years ago India as a country, was facing a huge divide. The government of India had passed...

Pros and Cons of Going Public

The decision to take a company public is a huge one. When a company gets listed on an exchange, it...

Benefits of Delaying Profitability

Profitability was always the core reason behind the existence of a company. For many businesses it still is. There is...

Why Do Corporations Get Away With Tax Avoidance ?

Some of the well-paid engineers in companies like Amazon pay about 45% of their income in taxes. They do so...

The Panaya Acquisition

If mere numbers are considered, Panaya is a small blip on the radar of the global Information technology behemoth Infosys....

The Flipkart and Wal-Mart Alliance

Flipkart is amongst the largest unicorns in the Indian startup ecosystem. Wal-Mart is a known international retailer with revenues upwards...

Initial Coin Offerings: A Primer

We all know about initial public offerings. These events are held to issue new stock and sell them to the...

What are Demergers: Its Pros and Cons

Mergers and acquisitions are often used by conglomerates to create value. However, in some cases, demergers have also been effectively...

Benefits of a Holding Company

The holding company-subsidiary company corporate structure is extremely popular all across the world. All large companies serve as holding companies....

The Economics of Lawsuits

The United States of America takes pride in its judicial system. According to most American economists, the judicial system of...

Protectionist Sentiment over Flipkart Takeover

The Wal-Mart Flipkart deal has become historic in many aspects. Firstly, this is the biggest, most valued takeover of a...

The Impact of Tariffs on the Energy Sector

The American energy sector has really taken off in the past few years. The discovery of “fracking” or hydraulic fracturing...

Venture Debt – A Primer

The Fed has decided to raise interest rates steeply. One rate hike has already been announced this year (2018). It...

Interest Rates and Automobile Sales

The automobile industry sales have been stagnant for the past couple of years. However, this is bad news. This is...

How Should Companies Communicate With Wall Street?

Wall Street is very sensitive to communication. Every quarter, executives from top companies communicate their results to the street. Based...

Is Tesla Close to Bankruptcy?

Elon Musk cracked an April 1st joke on his investors. He first claimed that Tesla had gone completely bankrupt. Later,...

Myths Surrounding Toys R Us Bankruptcy

Toys R Us is an iconic American company. According to recent surveys, Toys R Us has a market share of...

The Economics of ‘Soda Taxes’

Sugary beverages manufactured by companies such as Coca-Cola and Pepsi are colloquially called “soda” in the United States. Americans consume...

Why the Xiaomi IPO Failed?

Xiaomi is considered to be one of the most valuable startup firms in the world now. This firm, which has...

How a Whatsapp Message Nearly Took Down a Company

Almost everybody knows that Whatsapp messages are often used to spread false information. A lot of times this information is...

The Case for Index Funds

People who invest their money in stocks can be split up into two categories. One category of people actively decide...

The Sears Bankruptcy

Sears has been one of the largest retailers in the world for many years now. The company has been in...

The Socialization of Losses

Joseph Stiglitz is one of the most renowned economists of our time. He once criticized the current economic system after...

The Sudden Downfall of IL&FS

The Infrastructure Leasing and Financial Services (ILFS) corporation were one of the bellwethers of India’s infrastructure sector. Ever since the...

Why Healthy Corporate-Regulator Tussle is Good for Free Market Capitalist Economies

What the Resignation of Urjit Patel Means for the Corporate Regulator Tussle in India Recently, in India, the RBI or...

What Happens when Businesses go Bankrupt? Insolvency, Aftermath, and Recovery

How Countries Worldwide Handle Bankruptcies As part of the normal boom and bust cycles of Free Market Capitalism, businesses do...

Alibaba’s Singles Day

Alibaba is a Chinese online retail company. This company started as an Amazon wannabe in the Chinese economy. However, today...

Uber’s New Businesses

Uber is already a well-known brand across the world. Technically, the company is still a startup. However, Uber has a...

Goldman Sachs and the 1MDB Scandal

The 1MDB scandal is a scandal of epic proportions that was uncovered in Malaysia almost five years ago. This scandal...

Are Index Funds not a Good Investment in India?

The Indian equity markets are at an all-time high. This can be largely attributed to the large inflow of savings...

Can Brick and Mortar Stores Compete with Amazon?

Amazon has become the poster-child of the e-commerce growth story across the world. For many years, retail executives across the...

Problems Related to Facebook, WhatsApp, and Instagram Mega Merger

In the previous article, we talked about Facebook’s plan of becoming a social media conglomerate by merging different apps like...

The Whatsapp- Facebook-Instagram Merger

Facebook, Instagram, and Whatsapp are three major social media applications. These three applications have a combined user base of about...

What is the DHFL Scam?

In the recent past, the economy of India has been hit by one corporate marauder after another. It is surprising...

Financial Troubles in the Fracking Industry

The fracking industry has had a huge impact on the financial situation of the world in the past decade or...

Flipkart Circumvents India’s FDI Norms

The Indian government has been defensive about opening up its retail sector to global companies such as Wal-Mart and Amazon....

The Jaguar Land Rover Debacle

Jaguar Land Rover (JLR) produces some of the most exquisite and high-end luxury vehicles in the world. The company is...

The Kraft – Heinz Fallout

Kraft foods and Heinz, two Fortune 500 giants, merged in 2016 to form one of the largest companies in the...

Why Uber Should Be Regulated?

In 2017, a top European Union court has ruled that since Uber’s drivers provide transport services to customers, it should...

The Fall of an Ambani Scion

Dhirubhai Ambani was the perfect rags to riches story that India had ever seen. He had started out with nothing....

What is Litigation Funding?, Its Advantages and Disadvantages

Legal costs have long been a deterrent for people wanting to file lawsuits. In a country like America, the legal...

The Finance behind the Plastic Problem

The plastic problem has become a major talking point across the entire world. Almost every country in the world is...

The MasterCard Visa Duopoly

The global payments processing market is dominated by only two major players viz. MasterCard and Visa. Many experts find this...

Is the Lyft IPO Overpriced?

Lyft is one of the most famous tech unicorns in the world. There was tremendous amount of buzz in the...

The Alliance between Car Companies and Ride Hailing Apps

Automobile companies in India have been facing tough competition amongst themselves. Firstly, increasing traffic congestion in the cities is making...

The Amazon Divorce Deal

In April 2019, the stock price of Amazon had taken a beating because of the news of the divorce of...

The Lawsuit Between Spotify and Apple Corporation

Spotify, which is one of the largest music streaming websites in the world, has filed an anti-trust lawsuit against Apple...

The Story Behind the L&T- Mindtree Takeover Bid

The Indian stock market is abuzz with the news of a hostile takeover. Larsen and Toubro, which is one of...

Do IPO’s Affect Competitive Firms?

Many tech-based companies are lined up for initial public offerings (IPOs) in 2019. Many companies such as Uber and Lyft...

Can Cost Cutting Turn Out to be Expensive?

Downturns are part of an economic cycle. Every few years or so, the economy stops growing at a rapid speed....

The Economic Impact of Facebook Outage

Facebook is one of the largest social media firms in the world. The Facebook family of apps, i.e. Facebook, WhatsApp,...

The Apple-Qualcomm Legal Battle

Apple Inc. is the largest and the most profitable company in the entire world. However, of late, it has also...

Cross Border Credit Reporting

The geographical boundaries drawn by nation states are blurring in the 21st century. In many parts of the world, free...

The Wow Airline Debacle

The Icelandic budget airline “Wow airline” became the latest airline to go bankrupt in Europe. Of late, Europe has seen...

The “WeWork” Business Model

The name WeWork is now a known brand name for millennials around the world. This is a remarkable feat given...

Problem with Private Securities Offerings

The average person believes that they are legally allowed to make any investment that a rich person can. However, this...

The Amazon FedEx Breakup

Amazon and FedEx have traditionally had a love-hate relationship. On the one hand, Amazon is one of the biggest customers...

The Decline of the Big Corporation

The era of big corporations started during the industrial revolution. The past couple of centuries have witnessed the rise of...

The Gap-Old Navy Breakup

Economies of scale provide a significant advantage in the retail industry. This is the reason why all retail companies try...

Apple’s Acquisition of Intel’s Modem Business

Apple is one of the largest manufacturers of mobile phones in the world. The company is the largest in the...

Mergers and Acquisitions: A New Perspective

The nature of mergers and acquisition activity has drastically changed over the past few years. Earlier, most of the mergers...

Why are Corporations Hoarding Trillions in Cash?

Corporate America is flush with cash! Collectively, the Amazons’, Apples’ and other such publicly traded mega corporations account for close...

Courses

Links

Subscribe

Articles on Corporate Finance