June 29th, 2011 -- Posted in Finance |
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 29th, 2011 -- Posted in Finance |
While starting a business, the businessmen usually face many problems in financing them and deciding that which mode should be used to finance. In the beginning, most of the companies are scarce in resources that are the core input of the business i.e. finance, management, skillful human resource etc. having problems in a way is not a big hurdle if one has courage to face them. To get anything in your life, you will pay for it. So at initial every business faces challenges that need to be satisfied and addressed properly.
The business will definitely got stuck if the people do not finance its activities. This affects the cash flows of the business badly. Anything and anyone that is related to the business either the returns or the stakeholders are affected by the improper cash flows of the business cycles. So the improper management of cash flows is the big problem for financing the business operations.
Another thing that affects the financing activities of the business is the government regulation. The government of any country is the authority introducing and implementing the new regulations in the country. The businessman being the citizen of the particular country will definitely go in accordance of those regulations to get the benefits and profitable business legally. These regulations create many financial problems and cut the profits easily. The only solution can be doing business in such countries that have low business or financial barriers i.e. business registration, its license, other trade barriers, etc. the only solution that can be done for this problem is to study the jurisdiction of all countries and then make an arrangement to have a business in the country having small hurdles.
The main problem in addition to the above mentioned ones is the taxes implied by the federal board of revenue. This is also the main reason that makes the company’s profit to get down to minimum. With every single profit or revenue percentage, the taxes level and the amount charged per investment and return ill exceeds the normal. Taxes are also the big hurdle in financial condition of the company and it also needs to be addressed. The same upper solution can also be applied on this by studying the tax rates and other costs of the countries and ten start the business. It also differs from one jurisdiction to another and the person or owner could search in depth for the suitable one.
Human resource problems are also becoming a huge hurdle for the financing activities. Most of the companies are investing in the employees that are loyal for short-term and when they got enough training, they just switch to some better option. Hence, losing one trained employee, and hiring another, then training him according to the job and organization requirement is another big problem that needs extra financial expenses creating financing problems foe the companies. So the companies should try to retain the employees instead of doubling the costs and losing the skilled labor and recruiting the new ones having no experience.
These all above mentioned problems are the one that affects the financing of the business badly and by taking decisions prudently with consideration of the above mentioned suggestions, the businessmen can deal successfully in their fields.