Corporate Finance - A Quick Overview
Many of us will have heard of the term corporate finance
, it is often in the press or on TV, some of us may know someone who works in this field, or have had dealings with a member of an organisation that heads up their finance.
This then begs the question what is corporate finance? The best way to describe it is as the engine room of a business; it is the financial department that deals with all of the financial decisions that have an effect on the corporate value of the company.
It should be noted that corporate finance is focussed purely on the financial decisions of the corporation as a whole. As such it does not pertain to managerial finance, which is tasked with overseeing the financial decisions of all firms including corporations.
Corporate finance is also a study of risk, a corporation's financial risk. Corporate finance utilises tools and analysis in order to maintain and grow the corporations' corporate value, in the same instance managing its' risk.
This sector of the corporate world is of huge importance; its ability to incorporate the tools and analytical skills into the business practices that are commonplace in the corporate world is invaluable to a firm.
In addition to the analysis of risk, corporate finance is a discipline that deals with both the here and now, and the long-term future of a corporation. There are a variety of long and short-term decisions that need to be made by the corporate finance team; all of these contribute to the overall corporate value of the firm.
An example of a short-term decision would be the overseeing of current assets; this could be stock, a resource or a fleet of cars. The role of the corporate finance team in this instance is to ensure that there is a level of control pertaining to the cash flow, short-term borrowing or lending and all current assets and current liabilities. The finance team need to make regular decisions surrounding these short-term projects in order to ensure that the long-term projects are supported.
The long-term decisions that the corporate finance team will have to make normally include future financial forecasting, so taking a look a the current business sector and making predictions based on research as to the best place to put the corporations finances. Investment is a very important part of a corporations' corporate finance strategy, it involves risks, but calculated ones and is a way to make the corporations money work harder for them from inside the business, so the risk can be controlled and at times absorbed.
The world of finance is a very demanding one; those who choose to work within this sector can expect a high degree of work related pressure and stress. The degree of accuracy and attention to detail must be second to none, the aim is that the corporate finance team are able to absorb this through strategic decision making, leaving the client with the peace of mind that they are looking for from the outset.
by: Matthew Byatt
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