Corporate Finance

Corporate Finance deals with various financial strategies adopted by the organization to increase the market value of the organization. It can be called as management of the capital by the organization as well. The organization uses various tools and methods to make such decision.

The decision includes both long term and short term. The various decisions include allotment of funds for investment, the percentage of the profit that should be allotted to the share holders as dividend and merger & acquisition decisions. The short term strategic decisions are taken in case of crisis management, distribution of dividend and other short term goals. Whereas long term strategic decision are taken for long run of the company like diversification, expansion etc.

The Corporate Finance plays a vital role in deciding the future of an organization. That is because improper handling of fund will lead to a huge devastation both in short term as well as long run. The correct decision must be made at the correct time. The availability of the fund is the primary factor that drives the organization to run on a long term. The organization need to maintain a good market value because it would help the organization in the following manner

• Easy selling of its product
• Raising of funds will be easier for the organization with good market value as of in IPO, bank loan etc

Another primary need for Corporate Finance is Risk aversion. Risk includes business risk, financial risk, and total corporate risk. Business risk primarily affects the firms operation. It includes wrong investment in asset, business strategy etc. Financial risk is caused by the improper management of the fund that the organization had i.e. investing the fund in a wrong place at wrong time. Total corporate risk involves problem that the entire corporate may face as a whole due to some natural factor or decaying interest of the consumer on the product.

Corporate Finance thus plays a vital role in the proper functioning of the organization. It is therefore essential for the corporate to adopt a proper tool and method to make proper financial strategies and act accordingly. In short the smooth running or blockade on smooth running of an organization depends hugely on Corporate Finance, and hence Corporate Financier plays an important role.