What is Corporate Finance

5 minute read
What is Corporate Finance

Corporate finance is the domain of finance that deals with funding sources, capital structures of corporations, managerial actions to raise the firm’s value to shareholders, and the tools and analyses used to distribute financial resources. A professional of this field is responsible for overseeing the day-to-day financial operations of the company, including recording transactions, making financial decisions regarding loan requests or approvals, deciding how long debtors will have access to credit, investing in long-term or short-term assets, and allocating financial resources. In this blog, we will discuss everything about corporate finance.

What is Corporate Finance?

The area of finance known as “Corporate Finance” focuses on how businesses handle issues including funding sources, capital structure, accounting, and investment choices. By using numerous methods and long-and short-term financial planning, company finance frequently aims to maximise shareholder value. Capital investments and tax considerations are only two examples of corporate finance activity.

Must Read: Career in Financial Management

Who is a Corporate Finance Professional 

While an investment banker concentrates on generating capital, a company finance expert deals with daily financial operations and manages short and long-term business goals. Unlike most professions of this field, being an investment banker requires more education and experience. Typically, investment bankers make more money than company finance positions, especially at higher levels.

Types of Corporate Finance

The two types include:

  • Equity Financing – A business may choose to list itself on a stock market or use over-the-counter (OTC) platforms to sell its shares. Too much equity diminishes dividend shares and dilutes shareholders’ voting rights.
  • Debt Financing – Debt financing is the process of getting the necessary funding through loans, often from financial institutions, the sale of bonds, etc. Debt financing entails costs such as ongoing interest charges and principal payback at the conclusion of the loan term. In the event that a loan is not repaid, having an excessive amount of debt increases the danger of default or bankruptcy.

Also Read: MBA in Banking and Finance

Corporate Finance Principles

Let’s go through some fundamental ideas that explain this concept.

  1. Investment Principle – The importance of investing in the right options is emphasized by considering risk and return. The assessment of an investment proposal ought to be based on a threshold that has been defined and acts as a standard for return analysis. It’s crucial to make sure that the expense of raising financing does not outweigh the anticipated rewards.
  2. Financing Principle– To ensure that investors get the most return on their investments, financing principles are taken into consideration when choosing a financing strategy. The most important decision in this situation is whether to use loan finance, equity funding, or both. The capital structure is influenced by a number of factors, including the aims and structure of the organization, the cost of financing, interest rates, and equity market accessibility.
  3. Dividend Principle– The dividend principle of an entity specifies whether surplus should be allocated to shareholders in the form of dividends or used to expand the business.

Corporate Finance Courses 

Following are the top courses for corporate finance:

Courses Duration Eligibility 
Chartered Accountant course3-7 years10+2
MBA Finance course2 yearsAfter Graduation(Through Entrance Exam)
Chartered Financial Analyst course2-3 yearsGraduation / Final year of graduation
Cost management accounting course 3-5 years10+2

Roles and Responsibilities

Sccording to an organization’s job profile, the responsibilities include but are not limited to:

  • Evaluating and executing M&A and other investment opportunities.
  • Analyzing valuation and returns. 
  • Oversight of transaction due diligence.
  • Negotiation of transaction documentation including sales and purchase agreements and other legal documents.

Corporate finance professionals are in charge of determining the proper level of liquidity that the company should maintain and the make-up of that liquidity, i.e., cash, bank facilities, and so on. Additionally, they oversee the gross debt portfolio of the company through debt issuance and redemption, keeping track of debt issuance regularly. As needed, he arranges acquisition finance and negotiates conditions with the company’s financial service suppliers, such as banks. They professional goes on to provide the proper capital structures for business arrangements while taking into account the demands of the company, risk management, taxation, accounting, and legal/policy requirements.

Top Universities Abroad

Following are the top universities to pursue corporate finance courses abroad:

Name of the UniversityQS World University Rankings 2023
Harvard University5
INSEAD2 (By Subject)
London Business School554
Stanford University3
University of Manchester28
National University of Singapore11
Yale University18
Bocconi University6 (By Subject)
University of California, Los Angeles44
University of Toronto34

Top Colleges in India

  • IIM Calcutta 
  • JBIMS Mumbai 
  • IIM Bangalore 
  • IIM Ahmedabad 
  • IIM Kozhikode
  • FMS Delhi
  • ISB Hyderabad
  • IIM Lucknow
  • XLRI Jamshedpur
  • IIM Mumbai

Salary and Scope

According to the U.S. Bureau of Labor Statistics (BLS), the finance management field is growing quickly, with 17% job growth projected from 2020-2030. A financial management career can offer high salary potential and perks such as bonuses.

India19 lakh maximum
Global$77K to $110K


Q1. What are the 3 main areas of corporate finance?

Corporate finance is split into three sub-sections: capital budgeting, capital structure, and working capital management. 

Q2. What is an example of corporate finance?

Executing an initial public offering (IPO). An IPO is undertaken when a privately funded company decides to be listed on a stock exchange so that it can access funding from capital markets. Getting a credit rating.

Q3. What are the four areas of corporate finance?

In particular, there are four elements within corporate finance that everyone should be mindful of when doing any type of analysis. These four elements are operating flows, invested capital, cost of capital, and return on invested capital.

Q4. Is corporate finance difficult?

Finance is a moderately hard major. Finance is easier than STEM subjects but more difficult than liberal arts majors. Most students find a finance degree difficult because of the moderately complex mathematics involved, the interdisciplinary approach, and the unfamiliar concepts and vocabulary included in the major.

Q5. What is the goal of corporate finance?

The ultimate purpose of corporate finance is to maximize the value of a business through planning and implementation of resources while balancing risk and profitability.

If you want to get into a high-ranked university abroad, you’ll need more than just good grades; you’ll also need flawless application because the competition is fierce. You may enlist the assistance of Leverage Edu specialists to assist you with the application process so that you can realize your goals. Call us immediately at 1800 57 2000 for a free 30-minute counselling session.

Leave a Reply

Required fields are marked *