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.
Key Takeaways:
- 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).
- In addition to capital investments, corporate finance is concerned with monitoring cash flows, accounting, preparing financial statements, and taxation.
Understanding Corporate Finance:
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.