Corporate
finance is the area of finance dealing with monetary decisions that business
enterprises make and the tools and analysis used to make these decisions. The
primary goal of corporate finance is to maximize shareholder value. Although
it is in principle different from managerial finance which studies the
financial decisions of all firms, rather than corporations alone, the main
concepts in the study of corporate finance are applicable to the financial
problems of all kinds of firms.
The
discipline can be divided into long-term and short-term decisions and
techniques. Capital investment decisions are long-term choices about which
projects receive investment, whether to finance that investment with equity or
debt, and when or whether to pay dividends to shareholders. On the other hand,
short term decisions deal with the short-term balance of current assets and
current liabilities; the focus here is on managing cash, inventories, and
short-term borrowing and lending (such as the terms on credit extended to
customers).[citation needed]
The terms corporate
finance and corporate financier are also associated with investment banking.
The typical role of an investment bank is to evaluate the company's financial
needs and raise the appropriate type of capital that best fits those needs.
Thus, the terms “corporate finance” and “corporate financier” may be associated
with transactions in which capital is raised in order to create, develop, grow
or acquire businesses.
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