Corporate finance has three main areas of concern:

(a) Capital budgeting: What long-term investments should the firm take?

(b) Capital structure: Where will the firm get the long-term financing to pay for its investments? Also, what mixture of debt and equity should it use to fund operations?

(c) Working capital management: How should the firm manage its everyday financial activities?

2 The goal of financial management in a for-profit business is to make decisions that increase the value of the shares, or, more generally, the market value of the equity.

Of the topics we have discussed thus far, the most important is the goal of financial management: maximizing share value. Throughout the text we will be analysing many different financial decisions, but we will always ask the same question: how does the decision under consideration affect the value of the equity?