Corporate Finance Management
Finance is a broad term encompassing various things regarding the study, development, management, and distribution of financial resources. The word is derived from the Latin word “fiscus”, which means division. Therefore, finance can be seen as a division of things into two groups: private or public. Private funds are those which are owned by individuals, companies, or other entities. Public funds are those provided by governments or any entity acting on behalf of the government.
Finance is also used to refer to money management or capital budgeting. This latter concept is commonly referred to as Banking. Finance is related to all the processes involved in the movement of funds from their source to their final destination. That is, it includes the decision-making process for choosing which transactions to undertake and in what amount. It also includes the risk management that involves the determination of the rate of return on investments and whether these rates are enough to justify the risks taken with them.
Finance is an important part of most businesses and therefore, is almost always included in the balance sheet of a company. However, it is not always visible. In fact, in many cases, it is only the operating financing which is listed as an asset on the balance sheet of a company. For example, the bank providing credit cards and other loans may be an asset on the books, but the income it receives from the interest on these accounts and the fees it charges on the cash advances it makes are the income it earns, not its direct production.
Finance also refers to the ability of banks to handle and manage their financial systems. Its goal is to make sure that short-term financing meets the long-term requirements of the investor. It includes both management and investment of those funds. As managers of these funds, finance is accountable for making sure they are invested in the right markets at the right times. At the same time, it is an integral part of any comprehensive system used to measure and control the risk and rewards associated with the assets of the enterprise.
The various methods of management include: raising capital through dividends; injecting or selling equity into the funds; leasing funds from other companies; purchasing fixed assets; and creating and utilizing profit sharing or other capital funds. Investment banks provide a wide range of commercial finance products including commercial mortgage banking, commercial real estate loans, commercial real estate transaction funding, corporate finance and corporate investment banking. These institutions also serve as venture capitalists. They often provide small business funding, debt funding, and growth capital.
Many organizations rely on the services of corporate finance management. The chief financial officers of corporations must coordinate among the different elements of corporate finance to ensure that all necessary financial activities are conducted in an efficient and profitable manner. To meet these objectives, there must be a high degree of coordination among the different corporate finance activities. The importance of corporate finance management cannot be stressed enough. Without it, a company can become mired in debt and will be unable to meet its obligations as well as its own goals and objectives.
