corporate finance

(noun)

Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions.

Examples of corporate finance in the following topics:

  • The Importance of Finance

    • Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make those decisions.
    • The primary goal of corporate finance is to maximize shareholder value.
    • Although it is in principle different from managerial finance, which studies the financial decisions of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to financial problems of all kinds of firms.
    • The terms corporate finance and corporate financier are also associated with investment banking.
    • Thus, the terms "corporate finance" and "corporate financier" may be associated with transactions in which capital is raised in order to create, develop, grow, or acquire businesses.

  • Mergers and Acquisitions (M&As)

    • M&A refers to the aspect of corporate strategy, corporate finance, and management dealing with the buying and selling of companies.
    • The combined company changed its name to Exxon Mobil Corporation
    • Mergers and Acquisitions (M&A) refers to the aspect of corporate strategy, corporate finance, and management dealing with the buying and selling of different companies and similar entities that can help an enterprise grow rapidly.
    • Mergers and Acquisitions (M&A) refers to the aspect of corporate strategy, corporate finance, and management dealing with the buying and selling of different companies and similar entities that can help an enterprise grow rapidly.

  • Financial Plan and Forecast

    • Financial planning is important in ensuring that corporate investment is financed appropriately, as well as seeing to it that money is spent in worthwhile investments .
    • Achieving the goals of corporate finance requires that any corporate investment be financed appropriately.
    • Management must identify the "optimal mix" of financing—the capital structure that results in maximum value.
    • Management must attempt to match the long-term financing mix to the assets being financed as closely as possible, in terms of both timing and cash flows.
    • Financial planning is important in ensuring that corporate investment is both financed appropriately, as well as seeing to it that money is spent in worthwhile investments.

  • The Role of Financial Managers

    • Capital investment decisions are long-term corporate finance decisions relating to fixed assets and capital structure.
    • Corporate management seeks to maximize the value of the firm by investing in projects which yield a positive net present value when valued using an appropriate discount rate in consideration of risk.
    • These projects must also be financed appropriately.
    • Achieving the goals of corporate finance requires that any corporate investment be financed appropriately.
    • An understanding of international finance and complex financial documents also is important.

  • Short-Term Loans

    • As is common in such cases, KKR planned for the newly private company to borrow money by issuing corporate bonds.
    • At KKR's option, these loans could then be replaced with eight-year corporate bonds (in effect, a put option) paying 11.75 percent.
    • For smaller businesses, financing via credit card is an easy and viable option.
    • It is interim financing for an individual or business until permanent or next-stage financing can be obtained.
    • Bridge loans are used in venture capital and other corporate finance for several purposes:

  • Advantages of Corporations

    • Shareholders of a modern business corporation have limited liability for the corporation's debts and obligations.
    • This enables corporations to socialize their costs.
    • Limited liability reduces the amount that a shareholder can lose in a company so it allows corporations to raise large amounts of finance for their enterprises by combining funds from many stock owners.
    • However, some jurisdictions also permit another type of corporation, in which shareholders' liability is unlimited, for example the unlimited liability corporation in two provinces of Canada, and the unlimited company in the United Kingdom.
    • However, a corporation can be dissolved by a government authority, putting an end to its existence as a legal entity.

  • Corporate Bonds

    • A corporate bond is issued by a corporation seeking to raise money in order to expand its business.
    • A corporate bond is issued by a corporation seeking to raise money in order to expand the business.
    • The term corporate bond is usually applied to longer-term debt instruments with a maturity date falling at least a year after the issue date.
    • Strictly speaking, however, the term only applies to bonds issued by corporations .
    • A corporate bond is issued by a corporation seeking to raise money in order to expand its business.

  • Structure of Corporations

    • The Finance department is also vitally important, as it is responsible for acquiring capital used in running an organization.
    • Another way a corporate structure can be defined is by business divisions.
    • Hewlett Packard (HP) is a good example of a corporate structure including multiple divisions.
    • Google Video is a division of Google, and is part of the same corporate entity.
    • Hewlett Packard is an example of a corporation with multiple divisions and subsidiaries.

  • Summary and references

    • "The Global Economy and International Financing. " Quorum Books, 2001.
    • "Managing Global Finance in the Digital Economy. " Praeger Publishers, 2002.
    • "Corporate Scandal Shakes India. " Wall Street Journal, A-1, 2009.
    • Multinational Finance provides a concise treatment of the investment and financial decisions facing the multinational corporation.
    • Topics like lease financing, financing with derivatives, international financial management, and corporate restructuring are also discussed.

  • Equity Finance

    • Companies can use equity financing to raise money and/or increase shareholder liquidity (through an IPO).
    • As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions.
    • Financing a company through the sale of stock in a company is known as equity financing.
    • Unofficial financing known as trade financing usually provides the major part of a company's working capital (day-to-day operational needs).
    • According to finance theory, as a firm's risk increases/decreases, its cost of capital increases/decreases.