Corporate finance is a topic of finance that deals with how businesses manage their capital, cash flows, accounting and investments are made. It is crucial for the students as they learn to manage cash flow. So, in this article, you will find out all the essential terminologies that you can write in your paper. However, finishing a corporate finance assignment is not everyone's cup of tea. It requires you to study and invest your time. But you can hire corporate finance assignment help for effortless submission of assignments.

Decoding Corporate Finance for You

If you are a student pursuing finance, you might be familiar with the complex world of corporate finance. Moreover, it is crucial to delve deep into and know everything about it. In this article, you will learn about crucial corporate finance terminologies. So, keep reading further.

Cost of Revenue

The cost of revenue refers to the total cost of manufacturing and delivering a product or service to consumers. It represents the money spent on providing a product or service. It involves raw materials, labour, overhead expenses, and more.

Formula: COGS + Shipping Cost + Commissions + Warranties + Returns + Other Direct Costs

Overhead Ratio

The overhead ratio measures the cost of running a business compared to its income. A low overhead ratio means that the company is reducing expenses that are not related to its production. These include office rent, advertising, utilities, insurance, depreciation, or machinery.

Formula: Overhead Ratio= Operating expenses/ TII + Operating Income

where: TII = Taxable Interest Income

Restructuring

Restructuring is done by a company to modify its financial and operational methods when facing financial structures. It involves changing the debt, operations, or structure of a company as a way of reducing the risk of monetary harm and improving the business.

PBIT

PBIT: Profit before interest and tax (operating profit). Operating income is a measurement of a company's net income earnings before interest and tax. The larger a company's PBIT value is, the more profitable the company is likely to be. It has no particular formula to calculate.

Over leveraged

When a company is carrying debt more than its operating cash flows and equity, it is called over-leveraged. An over-leveraged company faces difficulty in paying its operating expenses because of

the interest and debt burden. Once stuck in this loop, it only gets worse for a firm. This scenario often leads to restructuring or filing bankruptcy.

Revolving Loan Facility

When a financial institution provides the ability to withdraw, repay, and withdraw again the paid amount of the loan to the borrower is called the revolving loan facility. The interest rate is not fixed, but it depends on the amount of credit at the time of withdrawal.

Angel Investor

An angel investor is a private investor with a high net-worth individual who provides financial backing for small start-ups or businesses. Mostly, angel investors are relatives or friends of the entrepreneur. They provide funds for the firm and in exchange, they take ownership equity.

Teaser

Do you know about movie teasers? It is the same as a movie teaser. This document is provided to potential buyers of a company that may be interested in buying in future. It is to build interest in the business for the buyers.

EBIT

EBIT stands for earnings before interest and taxes. It tells about the company's net profit before paying income tax and interest expense. It is relatively similar to PBIT(Profit before income tax). However, if you need help with your assignment, you can seek homework help online.

Free Cash Flow

Free cash flow (FCF) is to measure the cash that a company makes after accounting for cash outflows to support its operation amount. It represents the profits a company generates after excluding the income statement's non-cash expenses.

Impaired Asset

It is an asset that has a market value less than the value listed on the company's balance sheet. The asset should be tested regularly to prevent any issues on the balance sheet. If an asset is overwritten on the

balance sheet, a loss will be recorded on the income statement.

Negotiable Instrument

It is a signed document that promises a fixed amount to a specified person or the assignee. It is a type of IOU: a transferable document in a person's name that will receive the mentioned amount on a future date or demand. For example, cheques, money orders and promissory notes.

Asset

An asset is a resource with value for an individual, company, or country that has authorization of it. The owner of the asset expects that it will benefit them in the future. It can be thought of as something that, in the future, can generate cash, improve sales, or be a profitable investment.

Non-Operating Asset 

Non-operating investments are assets that are not part of the ongoing business but still generate income or provide a return on investment. They are listed on the firm's balance sheet along with its operating assets. For example, unused land, spare equipment, investment securities, and more.

Cost of Equity

The cost of equity is the return a company expects from an equity they invested in. The formula for calculating the cost of equity is:

Cost of Equity = DPS/CMV + GRD

where:

DPS= Dividends per share for next year

CMV= Current market value of stock

GRD= Growth rate of dividends

EBITDA

It is earnings before interests, taxes, depreciation, and amortisation. It is used to measure a company's overall financial performance. However, it can be misleading as it does not count the cost of capital investments like property, plant, and equipment.

EBITDA= Net Income + Taxes + Interest Expense + D&A

Conclusion

So, the discussion of the crucial terminologies ends here. These are only a few of the many. As you know, corporate finance is a vast field, and there is always to learn more. In addition, writing on it requires studying the topic. However, to avoid this headache of writing, some students seek corporate finance assignment help from any online platform.