FAQ

What are the five basic corporate finance functions?

Corporate finance practice relates five basic functions:

  • Financing (or capital raising): Raising capital to support the operations and investment programs of a company. 
  • Capital budgeting: Choosing the best projects for a firm’s resources based on each project’s perceived risk and expected return.
  • Financial management: Managing a company’s internal cash  flows, working capital, and debt/equity financing mix in order to maximize the value of its debt and equity claims while also ensuring that the company can pay its obligations on time.
  • Corporate governance: Creating corporate-wide ownership and governance structures that require managers to act ethically and make decisions that benefit shareholders.
  • Risk management: Managing a company’s exposure to all types of risk, both insurable and underinsured, in order to maintain an optimal risk-return trade-off and thus maximize shareholder value.  

These functions are all connected; for example, a business requires financing to fund its capital budgeting decisions. The financial management decision is about managing the company’s internal cash flows as well as its external debt and equity mix. Its financing requirements are determined by how much internal capital it can generate and whether it chooses debt or equity financing. Companies are governed by a Board of Directors, which makes major financing and investment decisions, and all decisions are based on the risk involved.

Services

What are the 3 main areas of corporate finance?
What is the difference between financial management and corporate finance?
What are the 7 types of financial services?
What are the current key trends in financial services?
What is the meaning of corporate finance?
This site is registered on wpml.org as a development site.