Corporate finance and investment is a fascinating subject. In a world full of uncertainty and risk, managers attempt to make the investment decisions that maximize the present value of their company's stock price. Finance provides a set of tools for quantifying that uncertainty and risk. It helps managers make better decisions. This chapter made the following major points:

1. Finance is the set of activities a company engages in to decide how to raise, use, and invest money so it generates more cash, profit, and capital in the future.
2. All investments must be compared in terms of their relative risks and returns. The higher the risks associated with an investment, the higher the rate of return people will demand from that investment.
3. Business finance is about increasing the rate of return on a company's capital to maximize the market value of stockholders' equity.
4. Capital investment and budgeting involves developing a financial plan and budget to manage capital so that it leads to the highest return on invested capital (ROIC).
5. Short-term capital management decisions are involved when a company buys resources to make products that will be sold within a one-year period. A major goal of short-term capital management is to increase the efficiency of the company's working capital by speeding up the firm's operating cycle.
6. Long-term capital budgeting decisions involve choices about how to invest capital for extended periods of time. Managers make these decisions in part by estimating the net present value (NPV) of a proposed investment—forecasting the value of the future stream of revenues that will result from it, reducing those revenues to their current (present) value, and comparing them to the firm's current cost of capital. If the NPV of a project is positive, then a company should invest in it.
7. A breakeven analysis forecasts the revenues and costs associated with a project to locate the point at which the project's sales just cover all of its costs without a profit being earned. When a project reaches its breakeven point, the revenues and profits earned from it increase rapidly.
8. The goal of capital financing is to obtain the money a company needs to fund its activities at the lowest possible cost.
9. The goal of short-term financing is to minimize the costs associated with financing a company's operating cycle. The method of financing managers choose is determined by the makeup of their company's working capital, that is, by the percentage of working capital it has tied up in inventory, accounts receivable, final products, or cash-on-hand.
10. The three ways most companies fund their long-term capital investment projects are by (1) spending their retained earnings, (2) issuing debt securities, and (3) selling equity securities. A fourth method involves outsourcing production to another company so it does not have to invest its capital to buy machinery and plants.
11. Securities are investment documents that give investors a legal claim against the assets of a company.
12. Debt securities are investment documents that provide evidence of a company's legal obligation to repay within a certain period of time the money it borrows and make regular interest payments on that money in the meantime.
13. Equity securities are the capital stock certificates a company issues giving the owners of the certificates the legal right to a company's assets and the right to receive dividends from any profits the company makes.
14. An initial public offering (IPO) is the first time the owners of a company offer their stock for sale to the general public.
15. Four main types of stock are blue-chip stocks, growth stocks, income stocks, and speculative stocks.