Corporate Finance

  16-03-2026 Today's session focused on share repurchase or stock buyback and its impact on financial structure and shareholder value. A stock buyback reduces the number of outstanding shares, which can influence both share price and firm value. The discussion on buyback pricing was particularly interesting. If shares are repurchased at a price higher than market value, it may reduce the firm’s overall value, whereas buying at market price may leave the share price largely unchanged. We also looked at factors that favour share repurchases, such as flexibility, undervaluation, and tax advantages. Compared to dividends, buybacks allow companies to adjust their decisions based on market conditions. If a company believes its stock is undervalued, repurchasing shares can signal confidence to the market. The case discussion on Infosys raised an important question about whether buybacks reflect strong capital discipline or whether they limit funds available for innovation and long-term gr...

  12-03-2026 This session focused on corporate distribution policies such as bonus shares, dividends, and stock repurchases, and how they influence shareholder value and market behaviour. Bonus shares are issued to existing shareholders without any additional cost. While the number of shares increases, the share price adjusts proportionally, so the overall value of investment remains unchanged. This showed how companies can improve liquidity and make shares more affordable without actually changing shareholder wealth. Dividends represent the distribution of earnings to shareholders, which reduces retained earnings and available cash. However, dividend decisions also reflect investor preferences and corporate governance. Many investors depend on dividends as a regular income, and consistent payments signal management’s confidence in future earnings. Dividends also help reduce agency costs by limiting the misuse of excess cash. Stock repurchases or share buybacks provide another way ...

 09-03-2026 From my understanding , the discussion focused on financial distress risk, costs of financial distress, and the static trade-off theory of capital structure. The comparison between low-debt and high-debt firms helped me understand how debt levels affect performance under different economic conditions like boom and recession. Firms with lower debt have more flexibility and can continue operations even when cash flows decline, while highly leveraged firms face higher risk because they must meet fixed debt obligations regardless of their financial situation. The discussion on costs of financial distress included legal fees, bankruptcy costs, and administrative expenses. These costs reduce the firm’s total value because they consume resources that could otherwise go to shareholders or bondholders. It made me realize that financial distress is not only about bankruptcy but also about the additional burden it creates for the company. The static trade-off theory explained how ...

 05-03-2026 Today's session covered corporate long-term debt, Pecking Order Theory, and the tax advantages of debt, which gave me a better understanding of how firms make financing decisions. In corporate long-term debt, I learned that companies can raise funds either by issuing debt to the public or through private placements. Privately placed debt is issued to specific lenders, and its terms can be negotiated, which gives companies more flexibility. The concept of a call provision was also interesting, as it allows companies to repurchase their bonds before maturity at a specified price, helping them manage liabilities more effectively. The Pecking Order Theory explained the order in which firms prefer to finance their activities. Companies generally use internal financing like retained earnings first, followed by debt, and only then equity. This is mainly because internal funds avoid investor scepticism and reduce the need to disclose sensitive information. It also explained why...

03-03-2026 The session focused on financing activities, features of common and preferred stock, and the case discussion on Byju’s financial crisis, which helped connect theory with real business situations. Understanding financing activity conceptually made things clearer. Companies primarily use cash for capital expenditure and working capital, and when internal cash flows such as retained earnings and depreciation are not sufficient, they face a financing deficit. This forces them to raise external funds through debt or equity. The features of common stock highlighted aspects like voting rights, election of directors, “one share one vote,” and proxy voting, which showed how shareholders participate in decision-making and control the company. In contrast, preferred stock offers preference in dividends and liquidation, along with features like cumulative dividends, but generally does not provide voting rights. The Byju’s case made these concepts more practical. The company’s reliance o...

24-02-2026 The discussion on Weighted Average Cost of Capital (WACC) helped me understand how companies evaluate the true cost of financing their operations. Earlier, I saw WACC mainly as a formula, but working through the problem made me realize that it actually reflects a firm’s capital structure and overall risk profile. We were given inputs like the market value of debt and equity, cost of debt, beta, tax rate, market risk premium, and risk-free rate. Calculating the cost of equity using the CAPM formula , helped me clearly see how systematic risk (beta) influences the return expected by shareholders. Another important step was adjusting the cost of debt by multiplying it with (1 – tax rate). This highlighted the tax shield benefit, showing how interest payments reduce taxable income and lower the effective cost of borrowing. Assigning weights based on market values of debt and equity made the calculation more meaningful. It showed how each source of finance contributes proportiona...