Corporate finance is a section of the finance industry that focuses on the funding sources, capital structuring, and investment decisions of a corporation. The overall goal of this type of finance is to maximize the amount of profit a company makes through long-term and short-term planning. Maximizing profits will greatly increase shareholder value, which also benefits the corporation.
Those who work in corporate finance are responsible for a variety of a business's tasks and decisions. To start, corporate finance involves planning and executing capital investments. Capital investment is the process of investing money in order to expand a company. Those in corporate finance must use capital budgeting to spread available money in the best way possible. This task is extremely important for a corporation as it determines where a company's profits go. If capital budgeting is poorly done, then a company's financial position can be compromised. In addition to capital investment, corporate finance also includes completing capital financing. Contrary to investment, financing is all about borrowing and gathering money. This job is key because it is important for a corporation to have strong equity but not fall into debt. Finding this balance is a tricky assignment for any enterprise. The previous two duties that we spoke of were long-term plans. However, one short-term commitment is for corporate analysts to manage cash flows and ensure that there is enough capital for day-day operations to proceed.
To conclude, corporate finance is a core aspect of any organization that aims to succeed in finance. There are various careers to be found in this field, and it is essential in the economy.
Kenton, Will. “Understanding Corporate Finance.” Investopedia, Investopedia, 28 Aug. 2020, www.investopedia.com/terms/c/corporatefinance.asp.