Corporate Finance (Wedn.

7:30-9:30)
Submitted by: Agarin, Conbelyn I.
A.
1. What is Corporate Finance?
It 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
stockholders, as well as the tools and analysis used to allocate financial resources.
2. Who are the various players in corporate finance?
Companies, Investors and Intermediaries
3. What is the role of corporate finance lawyer?
The role of lawyers is to ensure legality of commercial transactions, through advising
corporations on their legal rights and duties, including the duties and responsibilities of
corporate officers.
4. When may a company need to seek financing?
The company may need financing in the following instances:
a. When it has a need to raise its capital
b. When it is necessary to acquire properties, real or personal, in pursuit of it business
activities.
c. When its debt rises
5. What do you mean by market conditions?
It is the characteristic of a market into which a company is entering or into which a new
product will be introduced, such as number of the competitors, level or intensity
of competitiveness, and the market's growth rate.
6. What is sound financial management?
It refers to the various methods and strategies that individuals, organizations or
government may employ in order to facilitate stated goals or to achieve desired financial
objectives. That is to say that sound financial management includes all the applicable practices
that will help in the realization of good financial results.
B. Option to raise capital based on the following factors:
Maturity:
Existing Capitalization:
Creditworthiness:

Stability of its cash earnings:

Value of its assets:
C. What do you mean by market conditions?
It is the characteristic of a market into which a company is entering or into which a new
product will be introduced, such as number of the competitors, level or intensity
of competitiveness, and the market's growth rate.
D. What is sound financial management?
It refers to the various methods and strategies that individuals, organizations or
government may employ in order to facilitate stated goals or to achieve desired financial
objectives. That is to say that sound financial management includes all the applicable practices
that will help in the realization of good financial results.
2. Distinguish between debt and equity.
Debt refers to borrowing of money to be repaid, plus interest.
Equity refers to raising of money by selling interest in the company.
3. Distinguish between short-term debt and long-term debt.
Short-term debt is an account shown in the current liabilities portion of a company's
balance sheet. This account is comprised of any debt incurred by a company that is due within
one year. The debt in this account is usually made up of short-term bank loans taken out by a
company.
Long-term debt refers to loans and financial obligations lasting over one year. It includes
any financing or leasing obligation that are to come due in a greater than 12-month period. Such
also includes company bond issues or long-term leases that have been capitalized on a firms
balance sheet.
4. Distinguish between fixed-rate interest and floating rate interest.
A fixed rate interest is an interest rate on liability, such as loan or mortgage, that remains
fixed either for the entire term of the loan or for the part of this term.
A floating interest rate is also known as a variable or adjustable rate. It refers to any type
of debt instrument, such as a loan, bond, mortgage, or credit that does not have a fixed rate of
interest over the life of the instrument.
5. Distinguish Illiquidity and Insolvency.
Illiquidity refers to a state of a security or other assets that cannot be sold or exchange
for cash without substantial loss in value.
Insolvency is the inability to pay debts as they become due. Under the balance-sheet
approach, it means that total liabilities exceed total assets.

6. What is the matching liabilities with assets?

It means that the typical company will have a revolving credit facility providing shortterm working capital or cash management financing, as well as longer-term debt matching
capital assets or otherwise representing more long-term ballast in the capital structure.
7. What is corporate strategy?
The overall scope and direction of a corporation and the
various business operations work together to achieve particular goals.

way

in

which

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8. What is fixed rate financing and call protection?

It is a protective provision of a callable security prohibiting the issuer from calling back
the security for a period early on its life.
The call protection is advantageous to investors because it prevents the issuer from
forcing redemption early on the in the life of a security. This means that the investors will have a
minimum number of years, regardless of how poor the market becomes, to reap the benefits of
the security.