Corporate finance: the ten decisions a business actually has to make
Accounting records what happened. Finance decides what to do next: which project to fund, how to fund it, what the funding costs, and how much to keep back. These are the ten concepts that answer those questions.
Every finance question is one of four questions
Corporate finance looks like a long list of techniques and is really four questions asked repeatedly. What is a future rupee worth today? Which of the things we could spend money on is worth doing? Where should the money come from, and what does that source cost? And of what we earn, how much should we keep and how much should we return?
The first question is time value of money, and it underlies everything else on this page. Net present value, internal rate of return, discounted cash flow valuation and the pricing of a bond are all the same discounting arithmetic wearing different labels. Get comfortable with it and half of what follows stops being new material.
The second question is capital budgeting. The third splits into cost of capital, which prices each source, and capital structure, which mixes them. The fourth is dividend policy. Working capital sits underneath all four, because a business that cannot fund its own operating cycle never gets to make the interesting decisions.
The ten concepts, and what each one decides
Arranged so that each concept only needs what the ones above it have already established.
Time Value of Money
A rupee today is worth more than a rupee next year, and discounting makes the two comparable. Every valuation technique on this page is an application of it.
Financial Ratios
Turning absolute figures into comparable ones. A profit of two crore means nothing until you know it came from twenty crore of revenue or two hundred.
Capital Budgeting
Choosing between projects using net present value, internal rate of return and payback. The three can disagree, and knowing which to trust is the actual skill.
Working Capital Management
Funding the gap between paying suppliers and being paid by customers. It consumes cash in exact proportion to growth, which is why fast growth strains cash.
Cost of Capital and WACC
What money costs, weighted across debt and equity. It is the hurdle rate a project has to clear and the discount rate a valuation has to use.
Leverage and Gearing Ratios
How much of the balance sheet is borrowed, and how sharply profit moves when revenue moves. Leverage amplifies both directions equally.
Capital Structure
The debt and equity mix. Debt is cheaper and must be repaid; equity is expensive and permanent. The trade-off is between cost and survival.
Dividend Policy
Whether to return cash or reinvest it. The right answer depends entirely on whether the business can earn more on the money than the shareholder could.
Mergers and Acquisitions
Buying growth instead of building it. The valuation is the easy part; the synergies assumed to justify the price are where most of the value is lost.
Derivatives Basics
Contracts whose value derives from something else. Used to hedge a known exposure or to take a position, and the two uses have very different risk profiles.
Where these are taught in full
The Financial Modelling course builds a working model from historical data through to a discounted cash flow valuation, which is where most of these concepts meet in practice.
The calculators behind these decisions
Discounting, project appraisal and growth rates, computed rather than approximated.
Where finance turns into a decision
The funding question and the operating cash question, worked through with real numbers.
Test yourself on Finance
Ten topics covering ratios, discounting, capital budgeting and structure. Finance rewards fluency with a small number of formulas far more than breadth.
Open the study tool →Before you start
Is corporate finance different from personal finance?+
NPV or IRR — which should I trust when they disagree?+
What discount rate should I use?+
The other nine Learn topics
Every domain follows the same shape: the concept map first, then the lessons that teach it, then the tools and scenarios that put it to work.
The articles that apply this
The Learn page above is the concept map. These are the practical questions readers actually arrive with — a procedure, a decision, a situation with more than one right answer.