Tuesday, March 18, 2014, PM | Leave Comment
Corporate finance refers to the financial activities which are involved in running an organization. Corporate finance encompasses investment banking and capital investment decisions which are taken by a department which controls the financial activities of a firm.
Corporate finance decides whether a particular investment should be made by the company. Corporate finance involves decisions which are taken to meet the financial objectives of a company.
Corporate finance decides how much funds will be used by the company and how the finance manager will raise funds. It helps finance managers to decide how the funds will be put into best utilization.
Aspects of corporate finance
Corporate finance can be divided into working capital and fixed capital.
Raw materials are purchased with working capital, and fixed capital is used to acquire fixed assets.
Building, land and machinery, are purchased with fixed capital. Corporate finance encompasses investing and raising finance.
A finance manager tabs several sources to raise finance which include banks, shares, debentures and creditors. Costs of the company are minimized by the finance manager.
He takes decisions which can reduce the misuse of important resources. They decide how finances can be used profitably. Corporate finance helps finance managers to take decisions which help the organization to run smoothly.
Importance of corporate finance
Objectives of a company can be realized with the help of corporate finance. With corporate finance, you can help your firm to earn large profits and give accurate dividends to your shareholders.
Corporate finance is dynamic as it undergoes changes with changes in the environment. A finance manager can use his intelligent ways to invest money effectively.
Corporate finance is the backbone of a business. It is an essential aspect of most firms. It is required o expand and diversify a business.
To survive in the era of stiff competition companies need to spend on research and development. Corporate finance is needed when companies invent new products.
Role of finance
Finance is required to motivate employees. High salaries and bonuses can keep them motivated. Incentives such as canteen facilities and transport facilities can keep them motivated.
Finance is needed to pay day to day expenses. For expansion and diversification of a company, finance is essential.
With the help of corporate finance, a company can meet several exigencies. Finance plays a vital role in the smooth functioning of a company.
Finance is needed to buy new assets for the company. Dividends and interest need to be paid with the help of finance.
Corporate finance in an organization
Corporate finance is essential for the survival of a company. Corporate finance is used to decide how much dividend will be paid by the company. It aims at full allocation of resources across the business.
The department of corporate finance in a company handles all the financial matters involved in the business. The corporate finance department needs to interact closely with the other departments.
It helps an organization to reallocate money so that it can run smoothly. Corporate finance aims at maximizing the value of the company and minimizing risks. Two main functions of corporate finance are accounting and finance.
A career in corporate finance
If you have strong analytical skills, you can carve out a career in corporate finance. As a professional in corporate finance, you will have to look at factors which can affect your business adversely.
You can take part in internships to strengthen your resume. This will help you to leave a good impression on the recruiters.
If you gather experience in an investment banking firm, you will be able to obtain important positions in corporate finance.
Job outlook for careers in corporate finance is bright. You will be of great value to your employer if you learn to think critically about numbers.
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