Corporate Finance
Corporate Finance as a Discipline
Corporate finance (기업재무) is the decision-making process related to raising capital and efficiently allocating it in order to maximize long-term shareholder value. It includes the following components:
- Capital structure (자본구조) refers to the way a company finances itself, primarily through a mix of debt (external capital) and equity (internal capital).
- Capital budgeting (자본예산) is the process by which companies make long-term investment decisions, focusing on selecting investment projects that can maximize the firm's value by analyzing their costs and benefits.
- Dividend policy (배당정책) determines how a company distributes profits to its shareholders and involves maintaining a balance between reinvesting in the company and returning profits to shareholders.
Corporate Finance as a Course
Corporate finance is typically taught to second and third-year undergraduate students, focusing on financial decision-making in businesses. Key topics covered in this course include cost of capital, capital structure, raising capital, and dividend policy. Many universities adopt the textbook Fundamentals of Corporate Finance (13th Edition, 2021, McGraw-Hill Education, ISBN: 9781265553609) by Ross, Westerfield, Jordan (RWJ). The scope of corporate finance usually begins with Part 6 of this book, while Parts 1-5 are typically covered in Financial Management course. The following section explains the key concepts of corporate finance based on RWJ's chapters.