What is Corporate Finance?
Corporate finance is a broad term that is used to collectively identify the various financial dealings undertaken by a corporation. Generally, the term also applies to the various methods, procedures, and configurations of the financial operations employed by a given company. In most instances, corporations will have a specific financial division that is charged with the task of managing corporate finance in all aspects of financial operation.
One of the core functions of responsible corporate finance is to make wise use of the financial resources available to the company. As part of this action, the financial arm of the corporation will attempt to develop an operating budget that addresses all the needs of the company in terms of expenses, as well as work with other departments to track income generated from various operations and investments currently in place. Ultimately, the goal is to ensure that the corporation is achieving the maximum benefit from available financial resources, while incurring the minimum amount of expenditure required to attain those benefits.
Corporate finance may take on many different aspects as part of the overall management of the finances of the company. The functions may include the management of investments such as acquiring and selling stocks, bonds, and other investment ventures related to other companies. This area of finance can also involve creating and managing the process for issuing shares of stock or offering corporate bonds to generate resources for expansion projects. When acquisitions of property or other companies, mergers, corporate restructures, or the selling of company assets is involved, the actions are considered to be part of the corporate finance function.
Under the best of circumstances, responsible corporate finance activities promote the wise use of all financial resources, actively looks for ways to enhance the financial picture of the corporation, and in general makes sure there are assets on hand to maintain company operations. Chief financial officers and their immediate staff often have the authority to approve or deny various uses of corporate finance, although some issues may be deferred to a board of directors, or be subject to a vote by the shareholders of the company.
I have a niece who is graduating from college with an MBA degree. She told me that she is looking into corporate finance jobs. From what I found out the career prospects are quite good, and very much in demand. The pay is also good, and you get to travel and meet a lot of different people. I think she’d rather do that than simply be an accountant but I told her it’s up to her. Reading this has helped shed a little more light on the subject.
@allenJo - You can’t get away with stuff like that nowadays. The SEC has become a lot stricter about looking into the financial dealings of large corporations to make sure they understand corporate finance fundamentals. The penalties for those shenanigans have become a lot stiffer, too, from what I understand.
@allenJo - I think I know the company you are referring to. I won’t mention any names but Hollywood made a movie about that whole debacle. They treated it as if it was a joke, but it sure wasn’t a joke to the employees who saw their pensions wiped out. I think a lot of education has come out of that tragedy, however. Business schools offer essentials of corporate finance training courses with case studies that show some of the new techniques that companies use to manage their budgets.
Corporate finance consulting is a big aid in helping businesses to balance their risks with their financial goals. Companies who don’t understand how to manage their budgets properly will get in a heap of trouble real fast. I worked at a big corporation that went bankrupt when it was found out that the CEO was “cooking the books” and hiding huge losses from investors. He made it look as if the company was making money when in fact it was losing a lot, and investors had no idea before it was too late and the share prices dropped like a rock.
Thousands of employees vested in the company stock saw their 401Ks nearly wiped out in an instant. (I guess they shouldn’t have put all their eggs in that one basket). I eventually left the company myself and moved on to bigger and better things.
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