Question: What is the relevant of Corporate Finance to MBA Students?

Corporate Finance Continuous Assessment Assignment

Submitted by Lucas Labaran
Abstract:
MBA is for students interested in gaining management skills to effectively operate within
competitive business environments. The main aim is to develop the right skill set to manage
companies or businesses effectively, intelligently and efficiently. Good knowledge of
Corporate Finance is a crucial part of this journey as it is a determinant of business survival and
growth. A background in Corporate Finance adds to the right blend of competency to understand
the intricacies of financial management and ultimately help in the contribution to minimize costs
and maximize benefits in other to connect with the strategic intent of the organization or
business.
Introduction:
Master degree in Business Administration (MBA) is a branch of Business and Management that
teaches and equip students with the competency to lead a company or business venture, monitor
performance and growth and make critical decisions that will generate outcomes to develop a
sustainable and profitable enterprise.
The primary objectives of a business venture are to maximize wealth for the stakeholders.
Therefore “decisions on financing and investment go right to the heart of the business firm and
its success or failure (Adolphus J. Toby 2003, page 9).
It is therefore relevant for MBA students to gain understanding of corporate finance in other to
have essential financial skills to manage funds and investment, understand budgeting and
savings, analyze company financial reports, develop the combination of controls to take early
and urgent steps to minimize costs and maximize profit and stock value.
Finance Define:
The Editors of Encyclopedia Britannica (Aug 23, 2022) define finance as “the process of raising
funds or capital for any kind of expenditure.” It went further to say that “Finance is the process
of channeling these funds in the form of credit, loans or invested capital to those economic
entities that most need them or can put them to the most productive use.”
Finance therefore deals with matters of creation and management of money and investments. It
involves use of equity, loans and investment to finance projects. Adam Hayes (July 13, 2022)
asserts that “finance can be broadly divided into three categories: public finance, corporate
finance and personal finance.
There are many more recent subcategories such as behavioral finance which seeks to identify the
cognitive (emotional, social and psychological) reasons behind financial decisions.
Investopedia is of the opinion that “while finance has its roots in scientific fields such as
statistics, economics and mathematics, it also includes non-scientific elements and liken it to art.
Corporate Finance:
In an MBA lecture in RSUBS in September 2022, Dr Henry Akani describe Corporate Finance
as “the analysis of investment, financing and dividend policy decision of a firm to maximize
shareholder’s wealth”. He further explained that it involves “allocation and deployment of
financial resources or capital funds to investment proposals that will return benefits in other to
meet expectations of investors or shareholders” and asserts that it includes financial decisions
and performing the responsibility of determining appropriate means or capital structure and
mobilizing financial resources to assessed and selected projects that will yeald positive returns to
in shareholders wealth”. This he simplifies as “know where, how to obtain funds and at what
cost” as well as the “effect of such funds on financial risk of the business.”
Corporate finance therefore deals with how corporations address and react to funding sources,
capital structuring, accounting and investment decisions. It is charged with governing and
overseeing corporate financial activities and capital investment. In simple terms, they manage
current assets, current liabilities and inventory control and put them to best use to align the
business with its strategic intent of maximizing benefits for the owners.
Investopedia (Sept 2022) puts it succinctly that corporate finance is concerned with how
businesses fund their operations in order to maximize profits and minimize cost, deals with the
day-to-day operations of a business’ cash flows as well as with long term financing goals and
concluded that in addition to capital investments, corporate finance is concerned with monitoring
cash flows, accounting, preparing financial statements and taxation.
Business Administration:
Business administration involves management of business operations, decision making and
efficient organization and utilization of people and other resources to perform activities towards
the achievement of goals and objective of an entity. Broadly speaking business administration
“engage in a common set of functions to meet an organization goal.
Henri Fayol (1930 pp 79-81) described Business Administration function as consisting of five
elements: “management and planning, organizing, commanding, coordinating and controlling.”
Business Administration is therefore the planning, managing, organization, commanding,
coordinating and controlling of people and resources in an entity or an organization for the
purpose of achieving the goals and objectives of the said organization or entity.
Nexus Between Corporate Finance and Business Administration:
The nexus is that they all want the business to survive and to grow and are interested in the
diverse activities that will sustain the business. Corporate finance aims to maximize the value of
the firm by optimizing the capital structure of the business while Business Administration
focuses on the business management structure including the process that will make the business
succeed.
Nexus Between Finance and Corporate Finance:
There is a nexus between finance and corporate finance as while finance is a form of applied
economics that uses quantitative data provided by accounting, tools of statistics and economic
theory in an effort to optimize the goals of a corporation or business entity, corporate finance
focuses on using the organization current capital to make more money by minimizing risks with
the ultimate goal to increase shareholders wealth.
Conclusion
In glaring details with penetrating insight, the relevant of corporate finance to MBA students
cannot be overemphasized as it equips them with the necessary awareness and financial analysis
techniques that would serve as the metrics for quality business decision and also help in
discussion on financial direction of the business that would lead to increased earnings,
maximization of profits and ensure the long-term stability and growth of businesses they would
be involved in.