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Traditional Accounting Balance Sheet
Financial View of the Firm-Financial Balance Sheet
Corporate Finance or Business Finance?
Three fundamental principles that underlie corporate finance
-Investment Principle
(The investment principle determines where businesses invest their
resources)
-Financing Principle
(The financing principle governs the mix of funding used to fund these
investments)
-Dividend Principles
(The dividend principle answers the question of how much earnings
should be reinvested back into the business and how much returned to
the owners of the business.)
The objective in corporate finance for all of these businesses remains the same:
maximizing value.
# Investment of 10000
-ARR does not consider cash flows, which can be an integral part of
maintaining a business.
The average annual profit is 10,000 (50,000/5 years) and the average
annual investment is 50,000 (250,000/5 years).