Corporate Finance

Corporate Finance

Corporate finance WACC (Weighted Average Cost of Capital) weighted average cost of capital (stocks + debts with weights) Cost of equity cost of equity capital (shareholders require this yield) Cost of debt cost of debt (interest on loans) Capital structure financing structure (how many shares, how much debt) Leverage leverage (debt / capital, higher = more risky) Financial leverage use of debt to increase yield (per share) Operating leverage operational risk (fixed costs) M&A (Mergers & Acquisitions) mergers and acquisitions (combining companies) Synergies effect from combining (2+2=5, economies of scale) Accretion / Dilution analysis improvement or worsening of earnings per share from M&A Earnout payment in the future if targets are met (seller's insurance) Escrow deposit for guarantee (money in account until promises are verified) Due diligence company check before purchase (finance, law, operations) Material adverse change (MAC) negative change allowing the deal to be canceled Fairness opinion opinion that the price is fair (usually required by the board) Goodwill overpayment upon purchase (difference between price and assets) Intangible assets intangible assets (brand, clients, IP) Working capital management management of current assets/liabilities (liquidity)