Corporate Finance

Corporate Finance
The field of corporate finance deals with the decisions of
finance taken by corporations along with the analysis and
the tools required for taking such decisions. The principle
aim of corporate finance is enhancing the corporate value
and at the same time reducing the financial risks of the
company. In addition to this, corporate finance also deals
in getting the maximum returns on the invested capital of
the company. The major concepts of corporate finance are
applied to the problems of finance encountered by all type
of firms.

The discipline of corporate finance can be split into the
short term and the long term techniques of decisions. The
investments of capital are the long term decisions relating
to the projects and the methods required to finance them.
On the other hand, the capital management for working is
considered as a short term decision that deals with the
short term current liabilities and asset balance. The main
focus here rests on the management of inventories, cash
and, the lending and borrowing on a short term basis.

Corporate finance is also associated with the field of
investment banking. Here, the role of the investment banker
is the evaluation of the various projects coming to the
bank and making proper investment decisions regarding them.

The Capital Structure:

A proper finance structure is required for achieving the
set goals of corporate finance. The management has to
therefore design a proper structure that has an optimal mix
of the different finance options that are available.

Generally, the sources of finance will comprise of a mix of
equity as well as debt. If a project is financed through
debt, it results in causing a liability to the concerned
company. Hence in such cases, the flow of cash has various
implications regardless of the success of the project. The
financing done by equity carries a lower risk regarding the
commitments of the flow of cash, but the result of this is
the dilution of the earnings and the ownership. The cost
involved in equity finance is also higher in the case of
debt finance. Hence, it is understood that the finance done
through equity, offsets the reduction in the risk of cash
flow. The management has to hence have a mix of both the
options.

The Decisions of Capital Investments:

The decisions of capital investments are the long term
decisions of corporate finance that are related to the
capital structure and the fixed assets. These decisions are
based of several criteria that are inter-related. The
management of corporate finance attempts to maximize the
firm's value by making investments in the projects that
have a positive yield. The finance options for such
projects have to be done in a proper manner.

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My name is Tom Husnik. I live in Minnesota. My web site is
at http://www.bestfixitfinancial.com