Corporate finance involves financing, structuring capital and making investment decisions as regards the finance of your company. It deals with ways of maximizing the value of shareholders involved in the corporate affairs of a company through short and long-term financial planning and implementing several strategies. The activities of corporate financing encompass capital investment decisions and investment banking. Corporate finance is an arm of our financial advisory consulting services at The Swiss Quality.
What Corporate Finance Means
Corporate finance advisory is sometimes referred to as financial advisory. This is where professional service providers offer business-related help in raising capital through the most appropriate channel(s). It also deals with how to use the capital at hand to buy other useful businesses, and, assist businesses with the selling of some or all of their businesses to an already-identified suitor through an organized sales process. In other words, you can say corporate finance advisory is investment banking. You are correct anyway.
As a business owner, your corporate finance departments have the responsibility of governing and overseeing your financial activities and capital investment decisions. These decisions include deliberating on whether you must pursue a proposed investment and whether to pay for such investment with debt, equity or the two. Also, it determines whether every involved shareholder has an entitlement to dividends, how they can manage current assets, current liabilities, and inventory control.
Overview of Financial Advisory
The financial advisory or financial consulting aspect of an industry oversees the delivery of consulting services that leverage financial-analytical fundamentals. These offerings span various topics like transaction services, risk management, tax advisory, real estate advisory, compliance, and litigation, among others.
According to estimates, the financial advisory segment is worth $67 billion, almost a quarter of the global consulting market. Financial advisory, unlike other consulting aspects, has continually performed and enjoyed some stability through the years of crisis. They are driven by three main factors. Traditionally, the financial advisory market dominates firms that have a legacy in tax and audit services, especially large accounting firms and global consulting organizations. In the last few years, firms from other segments like strategy consultants, process specialists, and economic experts have built and established their footprint in the landscape of financial advisory. Because of the diverse amount of services within the context, each discipline within corporate finance has a large group of players.
Activities of Corporate Finance
Three fundamental activities govern corporate finance. These include investments and capital budgeting, capital financing, and dividends & return of capital.
Corporate Finance and Capital Investments
Making capital investments is an element of corporate finance. Deploying the long-term capital of a company is another important activity. Primarily, the capital investment decision process concerns capital budgeting. With capital budgeting, you can easily identify capital expenditures, do future cash flow estimation from the proposed capital projects, check planned investments against potential proceeds, and decide the particular projects to include in the capital budget.
Probably the most important corporate finance task you would do is making capital investments. Meanwhile, this comes with many business implications. Poor capital budgeting such as over-investing or under-funding investments can breach and compromise your organization’s financial position. This can be because of an increase in financing costs or sometimes because of inadequate operating capacity.
Corporate Finance and Capital Financing
Corporate finance is equally responsible for the sourcing of capital in terms of debt or equity. As a business, you can borrow from known commercial banks or some financial intermediaries. You can also issue debt securities in the markets through investment banks. You may sell your stocks to equity investors when large amounts of capital are required to expand the business. This is where capital financing comes in, acting as a balancing factor to decide on the amounts between debt and equity.
Too much debt may increase business risks and heavy reliance on equity can dilute the earnings and value for investors who start early. In the long run, capital financing caters to the capital needed to fund capital investments.
Corporate Finance vs. Short-Term Liquidity
Another responsibility related to corporate financing is short-term financial management. The goal here is to ensure that you have enough liquidity to execute your business operations. It concerns current assets and liabilities or working capital and operating cash flows. As a business owner, you must strive to meet all current liability obligations when due. That means you must have enough current liquid assets that can save you from disrupting the company’s operations. This may also involve getting extra credit lines as backups.
Goal of Corporate Finance
Corporate finance includes tools and analysis required to prioritize and distribute every necessary financial resource. It comes with the ultimate purpose of maximizing a business’s value through planning, implementing the management’s resources and balancing risk and profitability.
Corporate Finance as Consulting Services
The Swiss Quality offers corporate finance consulting as a business area focused on several forms of company financing as much as the different aspects of reorganizing the company concerning the structure of the owner.
As a service, it deals with:
Mergers and Acquisitions (M&A)
The aspect of mergers and acquisitions talks about consulting for companies involved in certain company transactions. Our company offers consulting services purposely for the acquisition and disposal of companies and other business units. This also entails cooperation between joint ventures, mergers, and other companies.
Distressed Mergers and Acquisitions
Another key area of our consulting service under corporate finance is M&A consulting for special situations. We provide adequate consulting services for distressed companies or for companies who are experiencing complexities with their earnings or those with a certain liquidity crisis.
Company Valuation Services
The company valuation services represent virtually all company transactions and financing requirements in the decision criterion of the company’s value and its business share. A reasonable, trusted and reliable valuation is critical for success. With our renowned and seasoned valuation specialists, we support you with the relevant questions to determine the value of your firm.
Importance of a Capital Structure in Corporate Finance
The capital structure of a company has an intrinsic link to maximizing the business value. This structure can be a combination of long- and short-term debts and equity. The basis for determining the accuracy of the balance or the extent of the risk attached to capital financing is established as a ratio of the liability to equity.
Corporate finance service has a high association with investment banking and is often associated with transactions where capital is raised to create, develop, grow, or in some cases, acquire businesses. That means it includes every financial activity you might think of. These range from planning to raising, investing, and monitoring of the finance to run a corporation and achieve its financial goals to maximize shareholders’ value. Thus, any decision you make which has some financial implications and involves the use of money is a corporate finance decision. Its functions, however, cut across different firms.
