Introduction to Corporate Finance

The field of finance that deals with the financial decisions of the companies is known as Corporate Finance. Its main function is to analyze different ways on how to increase the market value of the companies in terms of profit percentage and reducing the risks and constraints involved. Corporate finance is a major branch in the financial field and is of great importance to the economy of any nation.

The main goals of corporate finance are:

Its objective is to assess the accuracy of investment decisions.

Provide maximum optimization to the structure of corporate balance sheets.

To reward the investors or share holders.

Another important function of corporate finance is to improve the financial conditions ie.. improve the credit potential of the company so that it can borrow more funds from other financial institutions.

Corporate Finance is also involved in managing internal resources like human resources as well as management of business banking requirements of a company. Investment projects are mainly evaluated by the financial departments based on various factors. The companies also recruit the services of investment banks to advise them on financing methods, acquisitions, and financial risks and also to act as intermediaries between the company and the economic agents in lending like banks, investors etc.

Every company has the single goal of maximizing their profits and this is efficiently possible by investing in new ventures leading to increase in productivity and sales. Before investing in any venture, do an economic research and analyze the following factors:

Risks involved: whenever a new project is started, risk is studied at almost every step of operation. The feasibility of a project depends on a thorough study and economic research involving all kinds of risks. For example, if the management of a company selects an area where they think it will be very economical to start a new manufacturing unit, but according to the risk factors, if the area is politically unstable, the management will not go ahead with setting up the plant in that area, considering the risks involved.

Availability of resources : If a business has to run smoothly, it is important that there is sufficient resources available before starting any new venture and the corporations must study carefully about it. Even the cost of obtaining resources is considered along with transportation and other factors affecting them.

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