Meaning and definition of corporate finance
Corporate finance can be delineated as a monetary or financial activity dealing with a company and its money. As per Investopedia, this can consist of anything from IPOs to acquisitions. A corporate finance specialist assists a firm in evaluation of operating data and industry indicators in addition to providing advice about management on budget adjustment and decisions regarding general investment. Corporate finance is also sometimes referred as ‘corporate financier.’
Generally speaking, corporate finance is an area of finance which deals with monetary decisions made by business enterprises as well as the tools and analysis used for making these decisions. The regulation can be categorized into short term and long term decisions and techniques. Long term choices (about which projects receive investment) include capital investment, whether to finance that investment with debt or equity, and also whether and when to pay dividends to shareholders.
Conversely, short term decisions involve dealing with short term balance of the current assets along with current liabilities. The main focus herein is on managing inventories, cash, and short term borrowing and lending activities (like the terms and conditions on credit extended to customers).
Goal of Corporate Finance
The main goal of corporate finance is maximizing the shareholder value while managing the financial risk of the firm. Even though it is different in principle from managerial finance which studies all firms’ financial decisions, instead of the corporations alone, the core concepts included in the study of corporate finance are applicable to the financial problems of all types of firms.
The term corporate finance is also considered to be associated with investment banking. The specific role of an investment bank is evaluating the financial requirements of a company and thus raising the correct type of capital which fits those requirements in the best possible way. Therefore, the term ‘corporate financier’ or ‘corporate finance’ can be linked with transactions which involve raising capital so as to create, develop, grow, or acquire businesses.Besides being demanding, corporate finance jobs can be equally rewarding for a person involved in corporate finance ensures that controls around financial reporting mechanisms operate in an adequate and effective manner thus avoiding errors in financial statements.
- Debt ratios
- Liquidity ratios
- Profitability ratios
- Asset management ratios
- Cash Flow Indicator Ratios
- Market value ratios
- Financial analysis
- Business Terms
- Financial education
- International Financial Reporting Standards (EU)
- IFRS Interpretations (EU)
- Financial software