In today’s world, management is the key word. Each and every day, the importance of management and order is increasing. From the smallest unit, like an individual to the most complex matrix of a corporate organization, every structure needs management. Big corporate institutions too need to manage their finances to make sure they do not incur losses, and optimize on their profits. This requires careful study of corporate financing.
What is Corporate Financing?
Corporate financing means financial decisions taken by enterprises, using tools of analysis to arrive on the most suitable decision. The primary goal of corporate finance is to maximize corporate value while managing the firm’s financial risks. It is nevertheless different from managerial finance, which is related to the study of financial decisions of all types of firms and not just corporations. The fundamental aim of corporate financing is to study financial problems applicable to all kinds of firms.
Corporate financing can be bifurcated into two major genres:
Long-term: The long term choices include capital investment decisions; which are mainly concerned with which project should receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders.
Short-term: The short term decisions are concerned working capital management. Thus it concerns with the day to day capital expense monitoring and audits. It analyzes the short-term balance of current assets and current liabilities. The focus of short term decisions is on managing cash, inventories, and short-term borrowing and lending (such as the terms on credit extended to customers).
Also corporate financing has interminable connection with investment banking. Typically, an investment bank evaluates the company’s financial needs and raises the appropriate type of capital that best fits those needs.
