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.
This Blog Includes:
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.
- 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.
- 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.
- 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:
|Chartered Accountant course||3-7 years||10+2|
|MBA Finance course||2 years||After Graduation(Through Entrance Exam)|
|Chartered Financial Analyst course||2-3 years||Graduation / Final year of graduation|
|Cost management accounting course||3-5 years||10+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 University||QS World University Rankings 2023|
|INSEAD||2 (By Subject)|
|London Business School||554|
|University of Manchester||28|
|National University of Singapore||11|
|Bocconi University||6 (By Subject)|
|University of California, Los Angeles||44|
|University of Toronto||34|
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.
|India||19 lakh maximum|
|Global||$77K to $110K|
Corporate finance is split into three sub-sections: capital budgeting, capital structure, and working capital management.
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.
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.
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.
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.
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