Corporate Finance Analysis:      

Corporate finance is an area of finance dealing with financial decisions business enterprises make and the tools and analysis used to make these decisions. The core goal of corporate finance is to maximize corporate value i.e. increase the corporate value with the existing resources while efficiently considering the firm's financial risks. Although it is in principle different from managerial finance which studies the financial decisions of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms.      

A corporate financial Manager is a person that manages the monetary affairs of an individual or related individuals or indeed an entity or business to maximize monetary success or turn around a poor financial situation.      

To interpret the above definition, a corporate financial manager manages the cash invested by the investors and pools it together and prepares a plan for efficiently utilizing the funds to generate the maximum profit from the operations undergone. After which the reinvestment of the cash and the dividend issued to the investors is completely overseen by the finance manager.      

Corporate finance utilizes tools from almost all areas of finance. Some of the tools developed by and for corporations have broad application to entities other than corporations, for example, to partnerships, sole proprietorships, not-for-profit organizations, governments, mutual funds, and personal wealth management. However, in other cases their application is very limited outside of the corporate finance arena. Because corporations deal in quantities of money much greater than individuals, the analysis has developed into a discipline of its own. It can be differentiated from personal finance and public finance.       

Corporate finance analysis refers to a comprehensive analysis of the finance of a corporation / business / individual. This is done with a variety of financial tools.      

A company’s balance sheet is the ultimate tool to begin the corporate financial analysis, from which the following ratios shall be obtained.

* Leverage ratios

o Long term debt ratio

o Debt equity ratio

o Total debt ratio

o Cash coverage ratio

* Liquidity ratios

o Net capital to assets ratio

o Current ratio

o Quick ratio

o Cash ratio

* Efficiency ratios

o Asset turnover ratio

o NWC Turnover ratio

o Inventory turnover ratio

o Average collection period

* Profitability ratios

o Net profit margin

o Return on assets

o Return on equity

o Payout ratio

o Plowback ratio

* Market value ratios

o PE ratio

o Forecasted PE ratio

o Dividend yield

 

 

All the ratios mentioned above are completely essential in determining the financial position and performance of the corporation. In addition to this, there are certain other tools such as the DUPONT SYSTEM, which would also help to provide an analysis into the financial performance of the corporation.