Corporate Finance can be described as one of the division of a company that looks after the financial activities of that company. It is primarily concerned with the area of financial dealing to maximize shareholders’ wealth through financial planning and execution of various strategies.
Planning the finance: Planning of finance for a corporate is a key role that a finance manager has to perform. He takes the decision on questions like:
Raising the finance: Once the planning is over, the second stage is raising the finance. The finance manager has to raise the required finance for the company from various sources like:
Investing the finance: The objective of a company is to increase the wealth of shareholders. To achieve this, finance manager has to take decision regarding what will be the optimum investment for the company? Finance is of two types, long term capital and short term capital. Long term capital is used to fund purchases of long term assets like fixed assets which include land and buildings, plant and machinery, long term investments, etc. whereas short term capital is used for fund working capital need of a company like purchase of raw materials, expediting credit period to debtors etc. They are also used for day to day operational expenses like wages, utility bills, taxes, administrative expenses etc.
Monitoring the finance: The finance manager controls and manages the finance of the company. He has to minimize the cost of finance. He has to minimize the wastage and misuse of finance. He has to minimize the risk of investment of finance. He also has to get maximum return on the finance. In short, we can say he has to make an optimum utilization of company’s finance. Monitoring is a very complex job. There are new tools & techniques for monitoring funds.
Finance is the life blood of business. It is required by all types of companies. It is required for starting a company. It is required for running a company. It is required for the survival, stability and growth of a company. It is required for expansion and diversification of a business. Finance is also required for closing down the company.
So, a company cannot survive without finance. It requires promotional finance to start the company. It requires finance for research and development. It requires long-term finance to purchase fixed assets. It requires development finance for growth, expansion and diversification of business.
The crux is that a company can’t even think of running without finance. Finance is required in each and every stage of operation of a company. Without finance a company won’t be able to survive like a fish without water.