*The Main Areas of Concern in Corporate Finance*
There are three significant areas of concern in capital budgeting, which include capital budgeting, capital structure, and working capital management (Fracassi, 2016). The *capital budgeting* in the context of corporate finance refers to the process by which an organization undertakes a critical evaluation of the potential major investment projects (Ehrhardt, & Brigham, 2016). For example, construction of a new plant or expansion of a particular department within an organization can be categorized as typical projects that require capital budgeting before there are approved or even rejected. Many methods are often used in capital budgeting to evaluate the net worth of the potential or proposed projects. Some of the ways include and not limited to net present value (NPV), payback period, and constraint analysis.
The *capital structure* is another main area of concern in capital budgeting, where a firm searches for the primary sources of long-term financing for its projected investment projects (Ehrhardt & Brigham, 2016; Fracassi, 2016). In the context of corporate funding, the capital structure is composed of short term and long term debts as well as common equity of a company. Therefore, in the process of analyzing the capital structure, both the long-term and short-term liabilities are held into consideration.
*Working capital management* refers to the designed business strategy that ensures the attainment of the overall firm’s efficiency (Fracassi, 2016). This broad concept involves monitoring and evaluation of the company’s current assets and liability. Generally speaking, the working capital of an organization is composed of made up of its existing assets less its overall liabilities.
*Area Difficult to Address*
From my viewpoint, capital budgeting is the most critical and challenging area in corporate finance since it deals with the identification of the most appropriate project to invest in relative to its opportunity cost of capital (OCC).
References
Ehrhardt, M. C., & Brigham, E. F. (2016). *Corporate finance: A focused approach*. Cengage learning.
Fracassi, C. (2016). Corporate finance policies and social networks. *Management Science*, *63*(8), 2420-2438.
