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Corporate Finance
Corporate finance is the subfield of finance that deals with how corporations address funding sources, capital structuring, accounting, and investment decisions. Corporate finance is often concerned with maximizing shareholder value through long- and short-term financial planning and the implementation of various strategies. Corporate finance activities range from capital investment to tax considerations.
Corporate finance departments are charged with governing and overseeing their firms' financial activities and capital investment decisions. Such decisions include whether to pursue a proposed investment and whether to pay for the investment with equity, debt, or both. They also include whether shareholders should receive dividends, and if so, at what dividend yield. Additionally, the finance department manages current assets, current liabilities, and inventory control.
Capital Investments
Corporate finance tasks include making capital investments and deploying a company's long-term capital. The capital investment decision process is primarily concerned with capital budgeting. Through capital budgeting, a company identifies capital expenditures, estimates future cash flows from proposed capital projects, compares planned investments with potential proceeds, and decides which projects to include in its capital budget.
Capital Financing
Corporate finance is also responsible for sourcing capital in the form of debt or equity. A company may borrow from commercial banks and other financial intermediaries or may issue debt securities in the capital markets through investment banks. A company may also choose to sell stocks to equity investors, especially when it needs large amounts of capital for business expansions.
Short-Term Liquidity
Corporate finance is also tasked with short-term financial management, where the goal is to ensure that there is enough liquidity to carry out continuing operations. Short-term financial management concerns current assets and current liabilities or working capital and operating cash flows. A company must be able to meet all its current liability obligations when due.
Service Advantage
Corporate finance is concerned with how businesses fund their operations in order to maximize profits and minimize costs. It deals with the day-to-day operations of a business' cash flows as well as with long-term financing goals (e.g., issuing bonds).Partnerships are easy to establish-Hiring quality employees is easier, because new employees can be given a share of the business-Taxation is simple. Partnerships are ‘pass through’ entities, meaning each partner individually pays taxes on their share of distributions-State and federal filing requirementsare low, relative to a corporation
