Managing risk is perhaps the most important aspect of corporate finance. Most firms face diverse financial risks, namely market risk, interest-rate risk, and foreign exchange risk. Firms use instruments like options, futures, and swaps to hedge against such risks. It is through proper understanding and control of risk that a firm can protect its assets and ensure stable returns, and therefore, risk forms the core principle of sound financial management.
6. Time Value of Money
The time-value concept is one of the most basic concepts in corporate finance. It shows that a dollar today is worth
