What is Corporate Finance

What is Corporate Finance? Meaning

Corporate finance means only the finance of joint-stock companies. It is a narrow term.

Corporate finance is different from business finance. Business finance refers to the finance of all types of business, i.e. sole traders, partnership firms, joint-stock companies, etc. It is a broad term.

What Corporate Finance Includes?

Corporate finance includes planning, raising, investing and monitoring of finance in order to achieve the financial objectives of the company.

The followings are included in corporate finance.

Planning the finance: The finance manager plans the finance of the company. He takes decisions on questions like:-

How much finance is required by the company?

What are the sources of finance?

How to use the finance profitably?

Raising the finance: The finance manager raise (collects) finance for the company. Finance can be collected from many sources, viz., shares, debentures, banks, financial institutions, creditors, etc.

Investing the finance: The finance manager uses the finance to achieve the objectives of the company. There are two types of corporate finance, viz., fixed capital and working capital. Fixed capital is used to purchase fixed assets like land, buildings, machinery, etc. While working capital is used to purchase raw materials. It is also used to pay the day-to-day expenses like salaries, rent, taxes, electricity bills, etc.

Monitoring the finance: The finance manager monitors (i.e. controls and manages) the finance of the company. He has to minimize the cost of finance. He has to minimize the wastage and misuse of finance. He has to minimize the risk of investment of finance. He also has to get maximum return on the finance. Monitoring the finance is an art and science. It is a very complex job. There are new tools & techniques for monitoring funds.