Corporate Finance

Corporate finance is a term in finance that deals with the financial decisions and various financial dealings of a company. Corporate finance encompasses accounting, commercial and investment banking, insurance, venture capital, and corporate development and strategic planning. It is also defined as acquisition and allocation corporation's funds or resources. This is done with the main aim of maximizing the shareholder’s wealth i.e. the stock value.

In a corporation the funds are acquired from both internal and external sources at the lowest possible cost and may be obtained through equity e.g., sale of stock or debt e.g., bonds, bank loans. Under corporate finance resource allocation is the investment of funds; these investments fall into the categories of current assets which include cash and inventory and fixed assets for example machinery. Corporate finance is essential and it must also balance the needs of employees, customers, and suppliers against the interests of the shareholders.

Corporate finance as a filed has many functions but the core function is to make wise use of the financial resources available to the company. Therefore the financial arm of the corporation will attempt to develop an operating budget that addresses all the needs of the company in terms of expenses, as well as work with other departments to track income generated from various operations and investments currently in place. The company has to focus on achieving the maximum benefit from available financial resources, while incurring the minimum amount of expenditure required for attaining those benefits.

Corporate finance is divided into long-term and short-term decisions and techniques. The long term choices include capital investment decisions about which the company determines whether to finance a particular investment with debt or equity and when and whether they should pay dividends to the shareholders. The short-term decisions and techniques deal with the short-term balance of current assets and liabilities, how to manage cash, inventories and short term borrowings and lending.

Questions :                                                                     

• What is corporate finance?
• What is the core function of corporate finance?