What is corporate finance?

As the name indicates, corporate finance is about managing finances of a business enterprise. However, it is a vast field of work and comprises a lot of analysis, studies, interpolations and planning. Several software applications and tools are used for the purpose. In specific financial language, corporate finance is defined as implementing ways with an aim of maximizing value of shares in the stock exchange. Since this can only happen if other financial aspects of the company are in full flow, this term indirectly involves concepts of managerial finance as well. Managerial finance, as opposed to corporate finance, refers to all the activities involved in making major financial decisions of the business and finding solutions to financial problems of whatever kind.

What are the elements in corporate finance? 

Corporate finance can be categorized into two kinds, depending on their implementation schedule. They are long term finance and short term finance. Long term finance involves major decisions such as capital investment, paying dividends to stock holders, kind of investment, among others. Short term finance includes aspects such as management of current liabilities and assets. It also involves managing available cash, short term lending and borrowing and managing inventories.

Another important element of corporate finance is investment banking. This involves analyzing the current status of the company in terms of resources available and planning the best mode of making further investments. All elements in corporate finance are aimed at developing the business, increasing corporate value by making acquisitions and creating new opportunities of investment. Financial risk management is one of the most important elements of corporate finance. This is about gauging the risk to which the investments are exposed to and make contingency plans in order to hedge or salvage the risk. Precise measurement of risk can often save the company from sustaining heavy losses.
Corporate Finance

Important decisions taken in corporate finance

The important decisions taken in corporate finance are investment decisions, project valuation, available leverage or flexibility, quantifying uncertain aspects and making dividend decisions. Working capital management is another very important part of corporate finance and falls under short term finance. The growth and success of a business largely depends on how the working capital is managed because it is the only liquid cash available for a company. Most of the money is held in investments for most of the companies. So, it is important for businesses to prioritize their requirements and plan execution similarly.

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