Corporate Finance – What is Involved

Corporate Finance
Corporate Finance

Financial decisions, the analysis and tools that are required to reach these conclusions is what corporation finance is all about. The objective of this is to improve the value of the company while simultaneously reducing any financial risks. In addition it oversees that the company gets maximum returns on whatever ventures they have invested in. Corporate finance can be categorized into short and long term decisions.

Short term decisions like capital management deal with current liabilities and asset balance. This is basically management of cash, inventories and lending on a short term basis. The long term category deals with investments of capital in relation to projects and the techniques required to fund them. Corporate finance is also associated with investment banking. The investment banker is in charge of evaluating the different projects that are brought to the bank and making appropriate investment decisions.

For the company to be able to achieve their objectives, they need to have a proper financial structure in place. It has to be able to accommodate the various financial options that are available. These sources could be a combination of equity and also debt. When a business or project is funded through equity, there is a lower risk in terms of the cash flow. The one done through debt is more of a liability to the company which needs to be assessed. This automatically affects the cash flow even if the project turns out to be a success.

The company must try to equate the invest merge with the asset being financed as much as possible. When a company is adequately financed, it has enough in its reserves for any contingencies.