Understanding Corporate Finances and Its Main Functions

The greater the number of shareholders in a company, the more difficult it is to be relevant and have authority. This is why having corporate finance knowledge is so important. Decision making is essential for all companies, especially if it is related to capital investments.

What is corporate finance?

Corporate finance focuses on generating value and maintaining it with financial resources. All decisions already made have a financial impact on a company, which is why corporate finances within a business are very important. 

Corporate finance is related to the analysis and study of business variables that allow maximizing shareholder value. The main objective is to create capital, grow, and add business. 

Most corporations outsource corporate finances to specialized firms. Suria Global (L) Ltd. specializes in a wide array financial services and products to its customers. The company’s a multi-national, multi-facet investment company which deals on the principle of value added and sustainable social and economic prospects with globally expanding investments.

The group mainly operates in technology development, corporate finances, investment managements, financial advisory services, forestry assets in a cyclical economy, developing sustainable financial solutions, etc.

Corporate finance encompasses investment decisions such as: 

• Own financing
• Investment for the development of the company
• The financial model to be followed and the terms according to the investment.

Corporate finance is an area of finance that focuses on the monetary decisions a company makes and the tools used for decision making. Therefore, its objective is to find a way to generate value. Its functions can be assessed from three perspectives: 

• Informative: It has to do with the punctual and precise handling of the company's financial information. They try to keep the financial record up-to-date, and the analyzes show the reality of the organization. 
• Decisive: Here, the analysis of the information, the implications, and repercussions of the entire business participate. Analyze the explanation of business behavior. 
• Execution: This perspective makes the decisions made a reality. These decisions can be both long and short term. 

Corporate Finance Classification

Corporate finance belongs to the area of finance that focuses on how to generate value for a company. And these are divided into four groups: 

• Investment decisions: They focus on the study of real assets in which the company wants to invest. 
• Financing decisions: This is where the different ways of obtaining the funds required for the company to acquire the assets in which it has decided to invest are studied. 
• Decisions on dividends: At this point, it is important to keep in mind that all aspects of the company must be balanced. These decisions involve remuneration of the company's share capital and also involve depriving the company of financial resources. 
• Management decisions: these consist of day-to-day financial and operational decisions. 

Characteristics of corporate finance

Corporate finance has its own characteristics that make it different from other branches of finance.

• They value both the time and the money invested by a company. 
• They offer the company long-term investments that must be carried out simply and similarly. 
• Opportunity costs

Keys to corporate finance

The existential doubt between benefit and risk: The shareholder wants to make a profit. The fear of losing does not influence them; therefore, they seek to stretch performance. 

Cost of money: There are several times when money comes in. The owner of a financial object must be paid an amount to remove a resource. If we refer to the saver, we will talk about the interest rate, and if it is the investor, we will talk about the return. 

Doubt between investing and liquidity: Having physical money is essential for day-to-day work at the cost of offering investments.

Opportunity costs: This refers to the rate of return based on the best way to invest. 

Appropriate financing: Long-term financing must be capitalized with long-term funds as well. And the short-term ones, therefore in a short time. 

Leverage: It is the use of debt funds used to enlarge the properties of a company or a shareholder. 

Product diversification: Here the demands on various investments are diversified. 

Corporate finance risks

In the world of finance, there are several risks to take: 

Methodical risk: They are those that cannot be avoided. They damage the returns on the securities. It is important to know, and study certain elementary factors produce the degree of returns of an asset.

Non-methodical risk: These can be avoided. They can be reduced through diversification.

Total risk: It is the set of two previous risks.