Share On

Corporate Finance explained in short

It is the part of financing that deals with funding and financing of assets of a corporation through the capital structure. The main aim of corporate financing is to increase the value of an institution to the shareholders. It is done with the help of short-term and long-term financial planning and the discharge of various strategies such as research, analysis and other tools used to allocate the finance. Capital investment, financing, and investment banking have a strong relationship with corporate financing.

Capital Structure

  • Equity Capital: Corporate can sell shares off their firm to raise capital for finance. The owner can also purchase the ordinary shares or common stock of the company as risk capital. The equity capital is obtained by calculating the current market value of all the assets owned by the firm and subtracting the value of liabilities from it. The end value obtained is used in the investment. It is listed on the balance sheet of the company as the owner’s or stockholder’s equity.
  • Debt Capital: it is the fund borrowed by the firm and has to pay for it later within a stipulated time. It is also known as credit. Debt capital can be issued through bank loans, bonds issued by the public, notes payable. Lenders require a payment of interest from the companies; these companies can get sums by leveraging a small amount of money. The interest rate levied by the investors is known as the cost of debt capital.
  • Preferred Stock: it is considered as a hybrid asset as it has both the features of equity and debt. It has a higher claim on the assets and earnings than a common stock. The dividend owed to a preferred stock must be paid before that of a common shareholder. It carries no voting rights. The rating for this is generally low because they do not possess the same assurance as for the investment payments of bonds.

Capital Investment

The corporate finance department of a firm deploys the long-term capital. The capital investment is done with the expectation of future income and profits, which would recover the investment expenditure through earnings generated by the business over the years. The main focus of corporate financing is to make decisions regarding the key corporate finance procedure, capital budgeting. It is the most crucial factor of finance and the company’s economic condition depends on this. Over-investment or underinvestment can increase a company’s financial cost or make inadequate capacity planning. The budgeting determines the company’s expenditure, cash flow for future projects, helps in comparing planned investments for future proceeds.

Trends in Corporate Finance

  • Zero-Based Budgeting: The budgeting has a zero base. Every activity within the organization is monitored and the funding required for these activities are critically analyzed to determine the future costs. This budget is built according to the requirement of the company, additional and unnecessary expenditures are eliminated from it.
  • Use of new technologies: a number of firms are opting for revolutionary technologies such as predictive analytics and internet of things, cloud technology, and artificial intelligence. The colossal amount of data generated by the contemporary industries is almost impossible to analyze manually. A large number of firms are setting aside funds to invest in technologies that would simplify the big data and make budgeting easier for the corporate financiers.


Supply Chain Finance:Invoice Financing,Factoring And Discounting

White Paper By: Xoomworks BI

The supply chain finance is ready to be addressed, whether you see today’s trade credit situation as a business ethics issue or a technology readiness issue. Getting the “buy chain” flowing is essential to maximizing potential growth. In this white paper on “The ‘buy chain’ – the next place for world-class focus,” learn more about the supply...

How Financial Services are Achieving Technology-Enabled Competitive Advantage

White Paper By: Adlib

Competitive advantage in the financial services can be achieved by delivering an exceptional customer experience. This, as we all know, is a Herculean task and questions like “How to drive the business growth in financial services industry?”, “How financial services are achieving technology-enabled competitive advantage?”, “How the management of business...

Manage the Complexities of Multicurrency Transactions

White Paper By: xignite

Now a days the biggest challenge faced by all the MNC  is how to constantly adjust  the regional currency rates ,manage accounting, inventory and procurement  for multi-currency transaction. This descriptive whitepaper mainly focus on the following areas of challenges for facing the multicurrency transaction problems: Global multi-currency...

Transaction Reporting – what’s changing?

White Paper By: AutoRek

Transaction Reporting is one of the key priorities for regulators. Some are already warning that there will be no latitude for non-compliance, including late reporting. The aim of Transaction Reporting is to assist EU regulators in the detection and investigation of suspected market abuse. By implementing a robust, automated financial control regime, investments firms will ensure readiness...

MiFID II / MiFIR Transaction Reporting: A Practical Guide

White Paper By: Duco

One of the main criticisms of the original MiFID was that national regulators did not enforce the directive with the same zeal across Europe. The list of financial instruments covered has been extended to almost all instruments traded in European markets – with particular emphasis on the OTC derivatives market that was previously out of scope for MiFID I. The issue with making this...

5 Ways Electronic Invoicing Helps Businesses Get Paid Faster

White Paper By: Basware

Electronic invoicing delivers efficiencies across the accounts receivable cycle: invoice creation, invoice delivery, dispute management, posting, and reporting and analytics. Most impor­tantly, reducing Days Sales Outstanding (DSO) with electronic invoicing enables businesses to reinvest more quickly to drive company growth. This white paper details the inefficiencies of...

follow on linkedin follow on twitter follow on facebook 2018 All Rights Reserved | by: