Contents, Role, and Function of Corporate Finance
For businesses and investors alike, the financial situation of a company plays a crucial role and is a top concern. A business that knows how to manage its finances professionally and efficiently will find it easier to generate profits. But what exactly is corporate finance, what is its significance, and what role does it play? All this information will be provided through the following content.
Contents of Corporate Finance
Corporate finance typically includes the following main contents:
Investment Planning: Management needs to seek investment opportunities that can generate profits, plan expenditures, estimate revenues, profits, potential risks, etc.
Investment Decision Making: Based on the planning process, capital investment forecasts, and project investment effectiveness evaluations, management makes investment decisions.
Capital Needs Identification, Capital Mobilization: Based on the capital structure, forms of mobilization, advantages and disadvantages of each mobilization form, capital usage costs, etc.
Closely Monitor and Manage Capital, Revenues, and Expenditures to Ensure the Company's Solvency.
Profit Distribution, Establishment, and Utilization of Corporate Funds.
Control Business Operations through Indicators: Such as Revenue, Expenses, Financial Reports, etc., to evaluate the efficiency of capital use and make decisions in financial and business activities.
Implementation of Corporate Financial Plans: Specified through decisions related to corporate finance, strategic financial decisions such as investment decisions, borrowing, capital mobilization, or profit distribution (dividend payment for joint-stock companies).
Function and Role of Corporate Finance
Among the components that make up a business, the financial situation takes top priority because of its significant function and role, likened to the "health" of the company.
Functions of Corporate Finance
Corporate finance has the following main functions:
Capital Generation and Circulation: Corporate financial activities create and mobilize capital to ensure stable capital sources, providing enough for the company's operations to serve production and business.
Monitoring and Supervising Capital: Financial management personnel are responsible for monitoring and inspecting the capital circulation process to propose suitable measures to enhance capital control efficiency.
Income Distribution: The company's capital needs to be used appropriately, justly, and optimally to achieve the highest capital utilization efficiency.
Role of Corporate Finance
Corporate finance plays a pivotal and indispensable role in every business. It serves as a tool to manage the company's production and business activities.
Some key roles of corporate finance include:
Increasing Efficiency and Mobilizing Capital: Corporate finance ensures that capital mobilization occurs regularly and continuously, maintaining stability in the company's production and business activities. It means that capital mobilization ensures that the company's operations proceed smoothly.
Contributing to Enhancing the Business Operations' Efficiency: Financial activities provide capital for business operations, reduce borrowing costs, and contribute to increasing revenue and post-tax profits.
Controlling the Business Operations for the Company: Corporate finance is seen as a "lever" for the company's production and business activities to proceed smoothly and stably through balancing income and expenses, attracting capital, setting prices for goods, etc. Based on these activities, companies can easily assess the effectiveness of the activities being carried out and make timely adjustments.
The above is an overview of corporate finance. Corporate finance is an indispensable part of every business, and paying attention to and focusing on the financial situation will significantly contribute to the utilization and circulation of capital and enhance the efficiency of production and business activities.