Corporate Finance

Corporate Finance

Finance is defined as the management of large sums of money or as the financing of a business or other enterprise. Alternatively, a corporation's definition includes its legal status as a person but also means that it is a group of people or a company acting as a single entity. Additionally, an organization means two or more people working towards the same goal, much like a team. Interestingly, a team and a group exhibit the distinction that only a team works towards a shared goal. But the purpose of the present essay is to discuss corporate finance...

Thus, corporate finance centres on the financing or corporations, including how corporations raise the necessary capital to keep operating and growing, how managers maximize shareholders' value and how corporate resources are allocated. The particular field of finance also deals with corporate financial structure. A distinction is sometimes made between corporate finance and managerial finance, in that corporate finance focuses on financial management in corporations alone, whereas managerial finance includes all firms and businesses regardless of their size.

Hyatt Regency, Montreal, photo by Elena

Along these lines, corporate finance would be difficult to comprehend without understanding financial accounting and managerial accounting. Indeed, students of business, management and commerce more often than not have to complete introductory level courses for financial and managerial accounting. The main differences between the two subjects is that financial accounting is designed to elaborate on the financial aspects of the firm for external users (such as creditors, lenders, bankers and shareholders), while managerial accounting is designed for internal users (or employees and managers).

If one had to define accounting in one sentence, it would reflect the accounting equation, or Assets = Liabilities + Shareholders Equity. Obviously, the two sides of the equation must balance out for the firm to remain in the black and avoid falling in the red, common terms to describe a profitable company versus one that is crumbling under debt.