Role of Corporate Finance in Long-Term Investment Planning in an Organization

CORPORATE FINANCE
IN AN ORGANISATION.
LONG-TERM
INVESTMENTS
PLANNING
Table of Contents

CHAPTER - 1: INTRODUCTION........................................................................................................3
1.1 – Background of the study...........................................................................................................3
1.2 - Research aim and objectives......................................................................................................4
1.3 – Research questions....................................................................................................................4
1.4 – Rationale of the study...............................................................................................................5
1.5 – Significance of the study...........................................................................................................5
1.6 – Dissertation structure................................................................................................................5
CHAPTER – 2: LITERATURE REVIEW............................................................................................7
Theme – 1: Concept and importance of corporate finance................................................................7
Theme – 2: Long term investment and business growth.....................................................................9
Theme – 3: Significance of multiples in corporate finance used for business valuation..................10
Theme – 4: Concept and importance of investment appraisal techniques for long term financial
planning...........................................................................................................................................12
Chapter 3: Research Methodology.......................................................................................................14
Research type..................................................................................................................................14
Research Approach..........................................................................................................................15
Research Design..............................................................................................................................15
Data collection.................................................................................................................................16
Data analysis....................................................................................................................................17
Sampling..........................................................................................................................................17
Research limitation..........................................................................................................................18
Ethical consideration.......................................................................................................................18
Chapter 4: Data Analysis.....................................................................................................................20
Corporate finance as a concept contain huge role for company.......................................................20
Improving profit making opportunities is among the significance of corporate finance..................21
Potential sources of funds................................................................................................................23
Corporate finance play role in company’s growth...........................................................................24
Complex system is a key challenge of corporate finance.................................................................25
Financial management become more stagnant is a key advantage associated with the corporate
finance.............................................................................................................................................26
Corporate finance has a bigger role in both long term and short term financial growth of company
.........................................................................................................................................................27
Net present value method is a most suitable investment appraisal technique...................................27
Corporate finance provided a strategic and competitive edge to the Marks and Spencer Company 29
Corporate finance in business operations.........................................................................................30

Chapter 5: CONCLUSION and RECOMMENDATIONS..................................................................31
REFERENCES....................................................................................................................................34
Appendix.............................................................................................................................................37
CHAPTER - 1: INTRODUCTION
Topic: To study the role of corporate finance in an organisation while planning for long
term investments with reference to UK retail sector: A study on Marks and Spencer

1.1 – Background of the study
Corporate finance is one of the branch of finance which is concerned with how companies
deal with available sources of funding, structuring capital of the company and making
decisions pertaining to investments. The main concern of this branch of finance that is,
corporate finance is to enhance shareholder’s wealth by maximizing the value of their
holdings. This objective can be achieved through undertaking financial planning both in the
short term and long term perspective. There are mainly three activities performed under this
branch of finance that is capital financing, capital investment and returns to shareholders both
in terms of distributing earnings and repayment of their principal. Capital financing is
concerned with the decisions related to designing the capital structure of the company by
including both equity and debt components in such a way into the capital, so that an optimal
financing can be done, where costs are minimum and returns are maximum. Returns to
shareholder consists of how much of the retained earnings of the company should be utilized
towards dividend distribution and capital repayment to the shareholders of the company. The
last one but the most important activity performed under corporate finance is capital
investment and this is the only concern of the present study.
Capital investment in concerned about how to appropriate capital assets of the
company, so that highest possible risk-adjusted return can be obtained. When there are many
alternative investment opportunities available to the company and there is a need to choose to
one among them, then corporate finance provides for investment appraisal techniques through
which long term investment of a company can be planned in well manner. Through corporate
finance cash flows and capital expenditure of a projects can be analyzed and comparison can
be established between planned and projected income from the proposed projects.
Accordingly, the best project in terms of long term profitability can be selected.
In the present study, in the context of Marks and Spencer which retail company based
in UK, the concept of corporate finance will be discussed in terms of how long term
investment planning can be done through the application of corporate finance techniques
meant for investment appraisal. The role played by corporate finance in making long term
investment will be highlighted in the context of M&S in terms of how it helps the company in
maintaining stability in their business operations. Alsoin this study, the multiple finance
approach for valuation of a concern will be discussed with regards to M&S.

1.2 - Research aim and objectives
Aim
The aim of this study is to evaluate the significance of corporate finance in supporting
long term financial planning with regards to Marks and Spencer.
Research objectives
 To determine the importance of corporate finance and its significance.
 To evaluate the usefulness of long term investment for business growth.
 To assess the significance of multiple finance option for valuation.
 To make sure that Investment appraisal method are benefited for future growth of
company.
1.3 – Research questions
In order to accomplish the above the aim and objectives of this study, the following
questions will be addressed in this research that is;
1. What is corporate finance and its main importance for functioning of company?
2. How long term investment supports company to maintain stability in business
operation?
3. Define the most popular multiple of finance which is used in M&S for overall
valuation?
4. What are main Investment appraisal technique and why are they important for long
term financing planning?
1.4 – Rationale of the study
The main reason behind conducting this study is to evaluate how corporate finance is
helpful for the company while making long term investments. As long term investment
consists of very long period, the impact of the decision remains over the performance of the
company. The study aims to assess how business stability can be ensured through
appropriately investing in long term investment proposals. The study involves determination
of most popular and best technique for valuing a business. Also, the reason behind the study
includes identification of various investment appraisal technique and its significance in
planning for the long term investment.

1.5 – Significance of the study
The study is of great significance for companies particularly into the retail sector in
understanding how different techniques of investment appraisal can be applied in the real
world situation in determining best alternative among the available proposals of investment.
The study will provide deeper insight into the concept of corporate finance and its importance
in the functioning of the company which is considered to be very useful for financial analyst
and experts. Also, the study is of great use for other scholars and researchers in the similar
area of corporate finance, which helps in understanding the real application of the concept of
corporate finance.
1.6 – Dissertation structure
Chapter – 1: Introduction
The first chapter of this dissertation consists of overview of the study being
conducted, the aim, objectives and questions to be addressed through the research will be
mentioned. Also, rationale behind the research and its importance for various stakeholders
will be described.
Chapter – 2: Literature review
Under this chapter of the dissertation, critical evaluation of the research topic that is
corporate finance will be done through undertaking thorough investigation with the help of
scholarly articles, journals and books. This part of the dissertation consists of reviewing the
views and suggestions of various authors related to the research topic and thus forms the part
of secondary research. This section is further used in the data analysis chapter for supporting
the findings of the research.
Chapter – 3: Research methodology
The various techniques and tools utilized for accomplishing the research will be stated
under this chapter of the dissertation. It includes research type, philosophies, approach,
methods of sampling, data collection and analysis.
Chapter – 4: Data analysis and findings

Under this chapter, various information gathered through primary research will be
mentioned in a graphical manner along with its analysis which will be performed in a
thematic manner. The primary research findings will be further supported through the authors
statements mentioned in the literature review section.
Chapter – 5: Conclusion and recommendations
This is last chapter of the dissertation which will highlights various conclusions drawn
from the whole research. The aim and objectives of the research will be accomplished at this
stage as this section involves the answer to the research questions. Also, various techniques
of investment appraisal that could be applied by M&S will be recommended in this chapter.

CHAPTER – 2: LITERATURE REVIEW
This chapter titled as literature review consists of critical evaluation of the research
topic by gathering information that is already existing in a published form. The chapter aims
to study the different aspect of the research topic to gain useful and comprehensive view of
the topic of the research. The various sources that will be evaluated are books, journals and
articles published previously where the research findings of different authors and scholars are
present. The various research papers will be evaluated in order to assist in the current
research. Here the researcher has framed various themes under which various literature will
be reviewed to gain useful insight about various themes that has been formed on the basis of
objectives of the research. So, in the following section of this chapter, there are various such
themes for which past or existing literature will be reviewed in order to draw valid conclusion
about the research issue.
Theme – 1: Concept and importance of corporate finance
Corporate finance is a very important function performed by the financial department
of every business. In order to maximize wealth of the shareholders and generate optimum
returns for the business, corporate finance plays a very noticeable role. The meaning of
corporate finance is extended to decisions pertaining to financing and investments by
encompassing four different aspects that is, financial planning, raising funds from different
sources, making profitable investment and monitoring the performance of investment to
match up the planned and actual financial outcomes from the investment.
As per the views of Guenzel and Malmendier(2020), corporate finance can be defined
as that area of finance which deals with the various funding sources and designing of the
company’s capital structure along with the managerial actions with regards to enhancing the
value of the business and wealth maximization of shareholders. It includes many analytical
tools and techniques through which allocation of financial resources are done in order to
maximize profitability of a concern and returning higher value for the shareholders. In the
same way corporate finance is defined by Eka (2018), that it is the activities performed by the
financial team of the business which is mainly concerned with the raising of optimum finance
and ensuring that it is administered in the required manner, so that the financial objectives of
the business can be achieved. It involves such policies and practices carried out on the basis
of previous experiences and future anticipations about the affairs of the business. Corporate