Sound financial structure of the firm

The scope of Corporation finance emerged as a distinct field of study only in the early part of this century as a result of consolidation movement and formation of large scale business undertaking. In the initial stages of the evolution of corporation finance emphasis was placed on the study of sources and forms of financing the large size business enterprises. The grave economic recession of 1930’s rendered difficulties in raising finance from banks and other financial institutions. Thus emphasis was laid upon improved methods of planning and control, sound financial structure of the firm and more concern for liquidity. The post world war II era necessitated reorganization of industries and the need for selecting sound financial structure. In the early 50.s the emphasis shifted from the profitability to liquidity and from institutional finance to day to day operations of the firm.

The modern phases began in mid-fifties and the discipline of corporation finance has how become more analytical and quantitative. The techniques of models, mathematical programming and simulations are presently being used in corporation finance Corporation finance or broadly speaking business finance can be defined as the process of rising, providing and administering of all money or funds to be used in a corporate enterprise. Weeler define as “that business activity which is concerned with the acquision and conservation of capital funds in meeting the financial needs and overall objective of business enterprise.” Thus the scope of corporation finance is so wide as to cover the financial activities of a business enterprise right from its inception to its growth and expansion and in some cases to its winding up also