WHAT IS CORPORATE FINANCE?

The primary role of the financial manager is to ensure that his company has a sufficient supply of capital. There are two ways of looking at the financial manager's role: a buyer of capital who seeks to minimise its cost, i.e. the traditional view; and a seller of financial securities who tries to maximise their value. The financial manager negotiates with a variety of investors to obtain funds at the lowest possible cost. The cost of capital and the value of the securities vary in opposite directions. Minimising financing cost is synonymous with maximising the value of the underlying securities. The quality of a primary market for a security depends greatly on the quality of its secondary market. The secondary market determines the price at which the company can issue its securities on the primary market, because investors are constantly deciding between existing investments and proposed new investments.