Finance and Accounting
Corporate finance and valuation
What is a business worth, and should it spend money on this project or that one? Corporate finance answers both with a small set of ideas: money today beats money later, capital always has a cost, and value comes from cash flows rather than reported profit. Deal teams, investment bankers and chief financial officers use the same tools, and so does any manager who has to defend a business case.
Why this topic exists: Time value of money, cost of capital, capital structure, DCF and comparables: the CFA topics Corporate Finance and Equities, ACCA Financial Management and Advanced Financial Management, FMVA's valuation modules; where the field's fundamentals courses start.
Corporate finance is the set of decisions a company makes about money: which investments to take on, how to pay for them, and what to hand back to shareholders. Three ideas carry most of the weight. A sum received sooner is worth more than the same sum later, so future cash flows are discounted. Capital is never free, and the blended return lenders and shareholders demand, the weighted average cost of capital, becomes the hurdle a project must clear. And value is created by cash, not by reported profit, which accounting choices can shape.
Three ways to put a number on a business
| Method | What it does | Where it misleads |
|---|---|---|
| Discounted cash flow | Forecasts free cash flow and discounts it at the cost of capital | The terminal value often dominates, so a small change in long-run growth swings the result |
| Trading comparables | Applies multiples such as EV/EBITDA taken from similar listed companies | Assumes the market prices the peers sensibly and that they really are similar |
| Precedent transactions | Uses the multiples paid in past acquisitions | Deal prices carry control premiums and the mood of the market when they were struck |
Good practice runs more than one method and traces the gap between them to specific assumptions rather than averaging it away. A valuation is an argument, not a measurement: every number in it rests on a choice someone made. The financing side gets less attention than valuation but decides as much. Debt is usually cheaper than equity because lenders are paid first and, in many tax systems, interest is deductible; too much of it raises the chance of distress and pushes up the cost of both. Payout policy, whether to pay dividends, buy back shares or reinvest, follows from whether the company still has projects that beat its cost of capital.
Who uses these tools
- Investment banking and M&A teams value targets, structure deals and prepare the analysis that supports a price.
- Private equity and venture capital investors value companies they intend to own, layering debt and exit assumptions on top.
- Corporate development and treasury inside a company judge acquisitions, manage the mix of debt and equity, and set dividend and buyback policy.
- Managers outside finance meet net present value, internal rate of return and payback whenever they defend a capital budget or a new product.
On the exam side, the CFA Program covers this ground in its Corporate Finance and Equities topics, ACCA teaches it in Financial Management and carries it further in Advanced Financial Management, and CFI's FMVA gives valuation 15 % of its curriculum. None of them substitutes for valuing one real company from its filings and defending each assumption aloud. The statement work that feeds a valuation sits in financial statement analysis and modelling, the rate environment in economics, and the calculations themselves in Excel.
Next to this topic
- Accounting and bookkeepingDouble-entry, ledgers, the three statements and the reporting frameworks (IFRS, US GAAP): the base of ACCA Financial Accounting, AAT Levels 2 to 4 and CPA FAR; bookkeeping software (QuickBooks, Xero) is where most people meet it.
- Management accounting, budgeting and FP&ABudgets, forecasts, costing and variance analysis: what the CMA examines and ACCA Management Accounting and Performance Management teach; financial planning and analysis is the same work inside a corporate finance team.
- Financial statement analysis and modellingReading the three statements and rebuilding them in a spreadsheet: the CFA topic Financial Statement Analysis and the core of CFI's FMVA, whose curriculum weights modelling at 35 % and accounting at 20 %.
- Personal finance and financial planningBudgeting, saving, credit, insurance, pensions and estates for a household: the CFP Board's eight Principal Knowledge Domains give the professional map; CISI's Level 2 Fundamentals the entry point for people who will work in the sector.
- Investing and portfolio managementAsset classes, risk and return, diversification and portfolio construction: the CFA topics Equities, Fixed Income, Alternative Investments and Portfolio Construction; CFP's Investment Planning domain.
- Crypto-assets and blockchainDistributed ledgers, keys and wallets, smart contracts, tokens and DeFi: the technical side rests on the Bitcoin and Ethereum documentation, the consumer side on the FCA's warning that a crypto investor should be prepared to lose everything.
- Financial risk, regulation and complianceMarket, credit, operational and liquidity risk, Basel, AML and KYC and conduct rules: FRM Parts I and II, the CFA's Ethical and Professional Standards, CFP's Professional Conduct and Regulation; where finance meets the law.
- Banking, fintech and paymentsDeposits, lending and credit analysis, payment systems, cards and open banking: the UK Payment Systems Regulator's eight designated systems name the rails, CFI's CBCA the credit analyst's job; the field's newest titles live here.
- TaxIncome, corporate, VAT and sales tax, capital gains and returns: CPA REG and the TCP discipline, ACCA Taxation and Advanced Taxation, CFP's Tax Planning domain; the one finance topic every adult meets.
- EconomicsSupply and demand, national accounts, inflation, interest rates, monetary and fiscal policy: the CFA topic Economics; the macro context every other finance topic assumes.
Concepts to know
Glossary entries with the reason each one matters here.
- Time value of money
Compounding and discounting, the base of every valuation.
- NPV
The capital budgeting rule, and where IRR misleads.
- DCF
Firm and equity valuation from free cash flow.
- WACC
The discount rate for firm-level cash flows.
Certifications that test it
Vendor exams and free certificates; facts, cost and the preparation path are on each page, and the certifications hub has them all.
Frequently asked
- Is corporate finance the same as investment banking?
- No. Corporate finance is the whole discipline of a company's funding and investment decisions, practised mostly inside companies. Investment banking is one industry that sells corporate finance advice, chiefly on mergers, acquisitions and raising capital, to those companies.
- Why do two analysts value the same company so differently?
- Because the answer depends on inputs no one can observe: growth years ahead, future margins, the right discount rate and which peers count as comparable. A careful valuation states these assumptions openly, so readers can see which ones drive the gap.
- Does a manager outside finance need any of this?
- Enough to read a business case. Knowing that a project must beat the cost of capital, and that payback ignores everything after the break-even point, lets a manager ask the right questions of a proposal. The wider management context is under business.
Courses in the directory
143 courses are filed here; the top 6 by our ranking, details and the provider link on each course page.
Last reviewed 26 September 2026 · Getting Digital