Corporate Finance and Valuation – Essential for Value Addition!!!

Posted by: Dr. N. Kanakaraj | Digital Future

Preamble of Financial Planning

In the present scenario financial planning is a disciplined process and customized approach, which enables wealth for clients by way perfect advising. Financial Planning stay focused with client’s wealth maximization without sacrificing liquidity. Further these professionals use their expertise and prudential skills for enhancing the client’s profitability through attractive higher return. Effective financial planning is required by the clients due you to the paucity of most valuable financial resources available for investment. In simple terms, financial planning takes the dreams and life goals of individuals and these goals are divided into measurable financial goals and it can be achieved with systematic way of taking rational financial decisions.

In this context, the alternative avenues for investment are presented in a big picture approach.

Corporate finance is used to describe activities, decisions and techniques that deal with many aspects of a company’s finances and capital. Every decision made in a business has financial implications, and any decision that involves the use of money is a corporate financial decision. Defined broadly, everything that a business does fits under the rubric of corporate finance. All businesses have to invest their resources wisely, find the right kind and mix of financing to fund these investments, and return cash to the owners if there are not enough good investments.

There is the accounting version of corporate finance, which uses the historical, rule-bound construct of accounting as the basis for corporate finance. Decision making is driven by accounting ratios and financial statements, rather than first principles. There is the banking version of corporate finance, where the class is structured around what bankers do for firms, with the bulk of the class being spent on areas where firms interact with financial markets (M&A, financing choices) and the focus is less on what's right for the firms, and more on how the deal making works.

Every discipline has first principles that govern and guide everything that gets done within it. All of corporate finance is built on three principles: the investment principle, the financing principle, and the dividend principle.

Valuation is an important concept in finance and plays a key role in decision making when choosing an investment for a portfolio, mergers, and acquisitions. In valuation practice, there are two primary models that valuation experts use namely discounted cash flow (DCF) and relative valuation (RV). The first method explain the estimates of intrinsic value and later method is more relying on the market and assume that the market is correct.

In discounted cash flow valuation the value of any company is the discounted value of expected future cash flows. In relative valuation, the value of any company can be found from the pricing of the comparable variables such as enterprise value, equity value, and share price. The variables are standardized using an appropriate variable such as earnings before interest, taxes, depreciation and amortization (EBITDA), the book value of equity, and earnings per share. The standardized variables or so-called multiples are then used to estimate the target company. The accuracy of discounted cash flow valuation and relative valuation are vital as it is the foundation for many financial decisions.

Are you interested in making a career in Corporate Finance and valuation skills?

If yes, than you should acquire an educational background in MBA applied finance which should impart the following skills.

  • He / She should possess strong knowledge of different industries and business models.
  • He / She should provide robust modeling and reporting to facilitate executive-level decision making.
  • He / She should be adept at handling multiple tasks, logical reasoning and analytical reasoning.
  • Needless to say, He / She should have sound knowledge on Excel, MS Word and PowerPoint that will hint your competency levels.
  • Further, He / She has excellent spoken and written communication is preferred for presentation.

Now, let’s look into how can Corporate Finance and valuation skills help you in getting a job?

A job in the Corporate Finance and valuation is rewarding. I would like to highlight that corporate finance and valuation at this point is quite high in terms of job opportunities. If you’re looking to maintain your soundness, you will get paid well without selling your soul…

Corporate Finance and valuation provides jobs like…

  • Financial analytics: Analyze and communicate financial status as well as stock activity.
  • Forecasting and Planning: Analyze financial plans versus actual outcomes. Find key trends in data and recommend revisions accordingly.
  • Written reporting: Gather and summarize data to prepare quarterly and annual reports for management, board, and stockholders...
Depending on what kinds of positions you want to apply to, you may need to acquire a math mixed with a lot of hands on training like...
  • Advanced Microsoft Excel
  • Analyzing Income and Expenditure Statements, Risk and Return
  • Applying Regression Analysis and Time Value of Money
  • Assessing Balance Sheets
  • Asset Allocation within a Portfolio
  • Calculating Price Earnings Ratios, Return on Investment and Simple and Compound Interest
  • Constructing Balance Sheets
  • Creating Financial Models
  • Creating Income and Expenditure Statements
  • Collaboration on Projects
  • Determining Price Earnings to Growth Ratios
  • Devising Statements of Retained Earnings
  • Dissecting Statements of Cash Flow
  • Explaining the Determinants of a Firm's Capital Structure
  • Financial Planning
  • Forecasting Revenues
  • Producing Statements of Cash Flow
  • Projecting Expenses
  • Writing Research Reports
  • Writing Stock Analyses


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