Corporate finance is a broad term that involves planning, rising, and monitoring of finance inside an organization. It is a concerned with the wise use of available funds in order to increase the profits. Corporate finance aims to increase the value of the organization to its stakeholder. It ensures that the financial deals are in-line with the organization’s goals. It involves the management of stock, investment banking and bonds related to organization. It looks at how an efficient financial investment can be made. It helps maximizing the corporate profit while controlling the cost of group insurance. It also aims to analyze the where the finance is coming from and how to ensure that it will offer great returns.
Corporate finance department may determine the size, complexity and development of an organization. The primary objective of corporate finance is to implement various strategies to increase shareholder value through short-term and long term financial planning. Short-term planning includes inventory control and management of the current assets. Long-term planning includes new capital investments. Corporate finance is associated with two types of capital namely: equity and debt.
Equity is referred to shareholders’ investment in a business which carries rights of ownership. In a practice to increase the organization’s fund, there are three important decisions to be made. The primary is the investment decision which refers to the analysis of which project to take. The second is the financing decision which specifies how the projects are funded. The third and the last decision is the dividend decision which specifies whether any profit is there to be retained for future investments. In this way it manages a close track on all the risk and profitability factors in a firm.