Their purpose is to generate financial information that allows companies to think from the informational, decisive and executive perspectives. With a broader and more informed overview, Corporate Finance helps senior management make better decisions.
When a company works to give value to investments to obtain the highest possible profitability, what it seeks is to increase the profits of the shareholders. In this way, it tries to manage the assets to have more economic benefits. This is one of the functions of Corporate Finance , but it also serves for other specific actions.
What is Corporate Finance for?
Corporate Finance directly affects the administrative processes of any type of company , regardless of whether it is private or public. This area serves to create and maintain organizational value, based on the proper management of resources that serves to make decisions with accurate information.
It is about knowing how to manage the financial model, the sources of financing, the level of indebtedness, mergers and acquisitions , investment projects and the optimization of cash flow. In this sense, Corporate Finance can perform its function from three different perspectives or levels:
Information perspective
This perspective focuses on the precise use of the company's financial and economic information, for which it must maintain specific, detailed and up-to-date financial records. The aim is to ensure that financial reports and analyses reflect the real situation of the organization through updated procedures.
Decisive perspective
In this case, the information and the repercussions of the business structure are analyzed, which can determine the behavior of the organization. Through the use of tools such as dashboards, as well as profiles and financial analysis, it is possible to make decisions that generate value.
Executory perspective
Finally, the performance perspective is used to carry out the decisions cpa email lists that are made, which may be long- or short-term. It is also responsible for measuring those decisions that keep the company's strategic planning working to seek value, which is the essence of Corporate Finance.
Keep reading and discover the differences between short-term and long-term financing
Corporate Finance Decisions
As a result of the professional work of Corporate Finance, which contributes to increasing the economic benefits of the shareholders and owners of the organization, valuable information is obtained that allows responding to various business aspects. With this information, four types of decisions can be made:
Investment decisions. These are used to select the most suitable assets for the company to invest in. The first thing to do is to analyze the organizational needs in detail, to establish whether the investment will serve to replenish or improve stock, machinery or equipment.
Financing decisions. These are related to determining the appropriate ways to obtain funds, so that the company can make the investments it requires, through the acquisition of assets. To do this, the convenience of using own resources or those of others is analyzed.
Dividend decisions. Companies have to decide how to pay back the profits generated by shareholders' capital, while taking into account that this money will already be available resources. In this way, it seeks to define how to balance these aspects to maintain the financial health of the organization.
Management decisions. These are related to any operational or financial resolution of the business dynamics, which must be taken by management. In this sense, senior management relies on the analysis of financial statements to make these decisions, considering the real situation of the company and its prospects.