What Is Corporate Finance?

Corporate finance is a subfield of finance that deals🍸 with how corporations address fundin💛g sources, capital structuring, accounting, and investment decisions.

Corporate ♕finance is also often concerned with maximizing shareholder value through long- and short-ඣterm financial planning and implementing various strategies. Corporate finance activities range from capital investment to tax considerations.

Understanding Corporate Finance

Corporate finance has three main areas: capital budgeting, capital financing, and working capital management. Capital budgeting is the process of prioritizing funds toward the most profitable projects. Capital financing is determining how a company's investments and endeavors will be financed. Working capital management is concerned with cash flow for day-to-day operations and maintaining 澳洲幸运5开奖号码历史查询:liquidity.

While not necessarily an area of corporate finance, dividend distributions to shareholders are also a main concern because, in a publicly-owned company, shareholders are usually owners and expect returns for their investments.

Corporate Finance Activities

Corporate finance tasks include capital investing, financing, and liquidity manageﷺment.

Capital Investments

The capital investment decision process is primarily concerned with 澳洲幸运5开奖号码历史查询:capital budgeting.

Through capital budgeting, a company 💮identifies capital expenditures, estimates future cash flows from proposed capital 𒈔projects, compares planned investments with potential proceeds, and decides which projects to include in its capital budget.

Making capital investments is perhaps the most important corporate finance task and can have serious business implications. Poor capital budgeting (e.g., excessive investing or under-funded investments) can compromise a company's financial position, either because of increased financing costs or inadequate operating capacity.

Capital Financing

Corporate finance also involves sourcing capital in the form of debt or equity. A company may borrow from commercial banks and other financial intermediaries or may issue debt securities in the capital markets through investment banks. A company may also choose to sell stocks to equity investors, especially when it needs large amounts of capital for busi𝓡ness expansions.

Capital financing is a balancing act involving decisions about the necessary amounts of debt and equity. Having too much debt may increase default risk, and relying heavily on equity can dilute earnings and value for early investors. In the end, though, capital fina🐼ncing 🔯must provide the capital needed to implement capital investments.

Short-Term Liquidity

The goal of capital management is to ensure that there is enough liquidity in the short term to carry out continuing operations. Short-term financial management concerns current assets and current 澳洲幸运5开奖号码历史查询:liabilities, working capital, and operating cash flows.

A company must be able to meet all its current obligations when they are due. This involves having enough current liquid assets to avoid disrupting a company's operations. Short-term financial management may also involve getting additional credit lines or issuing 澳洲幸运5开奖号码历史查询:commercial paper as liquidity backup.

Working in Corporate Finance

Corporate finance attracts many job seekers. In fact, there's typically a lot of competition for corporate finance jobs.

According to the job site Indeed, these are the national average annual salaries for the following corporate finance jobs as of 2025.

• Chief financial officer: $144,563
• Financial planning and analysis manager: $120,148
• Cost analyst: $78,672
• Financial analyst: $73,812
• Treasurer: $73,856
• Corporate accountant: $69,655

The Bottom Line

Corporate finance is a subset of the field of finance. It involves proper budgeting, raising capital to meet company needs and objectives with debt and/or equity, and the efficient management of a company's current assets and liabilities.