You must have capital to run a business without the capital it’s impossible to run a business. It’s important to know when, where and how to get the capital it’s also important the right allocation of capital and its use. All these things come in corporate finance.
Corporate finance in a nutshell
Well you need to ask yourself that why the essentials of corporate finance matters a lot to you. The answer is very simple that is it’s impossible to run a business without the corporate finance and without the financial activities it’s impossible for a company to perform its operations. Corporations need corporate finance to run their operational activities and more importantly to create value. It doesn’t matter whether your business is small or big you must have a dedicated personal or a department to monitor the financial activities. If there is mismanagement in company’s financial activities than the company would not stay for longer period of time and will fail eventually.
Importance and essentials of corporate finance:
Corporate finance is different type of finance as compared to business finance. Corporate finance includes investing, planning, raising and monitoring of finance in relation to achieve the financial targets of the organization. These are as follows:
- Finance planning: In the finance planning phase, corporate finance needs to get a clear standpoint on certain phases. The finance of the company has to decide like where to get finance from and how much finance is required and the company will be profitable or not?
- Raising capital: Raising capital is most important task of corporate finance. Corporate finance has to raise the money from within a company with the help of sources like shares, banks, financial institutions, creditors or by selling stocks.
- Investing capital: In corporate finance there are two types of finance one is fixed capital and the second one is working capital. Fixed capital is used to purchases assets like buildings, lands, machine etc., whereas the working capital is used to purchase daily fixed expenses like salaries and raw material etc.
- Managing risk and monitoring finance: Monitoring of finance is very tough job. They have to make sure maximum returns on the invested capital. Risk management and monitoring finance is the key to controlling any organization effectively. They contribute in organization ability to protect its assets and use of its resources effectively and efficiently.
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