Corporate finance is basically a branch f finance that is related to the financial decisions made by corporations in order to boost up its functions focusing on the tools and techniques use by the business enterprises in order to make those financial decisions. For any business enterprise the finance is the backbone of that organization. The operations are no doubt maintained by different departments i.e. human resource, management, marketing etc but the whole system starts with the financial position and allocation of financial assets for different departments.
Corporate finance basically focus on the long term and short term financial decisions of the firms, thus making them financially sound and active by increasing their corporate value. The second portion also tries to have maximum benefits in financial terms while minimizing the risks. The long term investment decisions of the corporate finance includes the analysis of the financial markets a market competition in accordance of the worth of the company’s assets and financial position. This helps the company to think about the long term investments. The corporate finance make the company’s to decide in right direction, in right time during right market scenario.
Corporate finance helps in taking decision of capital investments that is commitment of money in suitable ventures for a certain time period to get a sound and beneficial return in any form. So it helps the company’s to decide that which project can be more profitable financially and which s the best part for investment. It also guides the corporation to select the mode of investment that either to invest through equity or go for debt financing.
This also helps the corporation to take the decisions of distribution of profit either to go for retained earnings i.e.re-investment in the business or go for dividend payments i.e. portion of profit paid by the company to its shareholders.
In short term decisions, it includes the assets and liability management of the company. If the liability exceeds the assets with high proportions, this will be a disaster for the company, hence corporate finance satisfy this need of the company by managing the cash and other inventories in a good way. It also guides the company to go through the hard situations wisely.
Corporate financing also guide the decisions of short term and long term borrowing that which kind of mode should be availed in which condition and on which terms. The lending procedure is also the part of the corporate finance short term guidance decisions.
Another concept of corporate financing is attached with the investment banks. This is done by analysis of the functions performed by the investment banks. These banks usually analyze the financial needs of the corporations and elevate suitable capital to satisfy those needs in an appropriate manner. Corporate finance is the best way to inject the capital in suitable places by availing appropriate opportunities to boost up the businesses.
June 29 2011 10:40 am | Finance