What are the Fundamental Functions of Corporate Finance?

Corporate Finance is the field which deals and manages all the financial decisions of the corporate. All the financial concerns of the company fall under this category. 

The main goal of the corporate finance department is to elevate corporate value. They manage all the financial risks to provide the solutions which are in favor of the company in terms of finance. All the financial decisions like investment, financing, dividend, liquidity, acquisition of resources, etc are made by corporate finance.   

It is their responsibility to identify the problems or issues related to the finance of the company beforehand and prevent them. However, corporate finance should not be confused with the business finance as these both are different entities.
 

Here we will discuss the fundamental functions of the corporate finance which makes it an important wing of the business. The core functions of corporate finance include  

• Finance Planning
• Finance Investing
• Raising capital
• Risk Management

 
Now let’s discuss them all in details.
 
 Planning of Finance 

 
This function of corporate finance is quite extensive. First, it needs to gather related information or data to plan and implement efficiently. 

Corporate finance must know the sources of finance and the finance required by the company. It needs to establish financial goals and objectives, analyze the financial structure, develop and implement the financial plan and monitor them.
  
Finance Investment 

All the decisions related to investing like where to invest and how much to invest is taken by corporate finance. The decision also involves the allocation of resources. 

Corporate finance is divided into two parts. The first part deals with the capital used to buy assets like land, property, building, etc and it is known as fixed capital. The other one is called working capital which deals with the capital involved in raw materials and day-to-day expenses.    
  
Raising of Capital 

 
This task of corporate finance has direct implications on the growth of the finances of the company. To make the decisions to raise the capital or finance is a very crucial aspect of any company.

Corporate finance strives to raise money from sources like banks, shares, creditors, debentures, etc. To raise the capital, the company can sell stocks. It is definitely a big responsibility. The raising of finance is important to expand the business.  
  
Risk Management 

 
Managing risks requires vigilance and a great deal of attention. Risk pertains almost in every decision but to identify those risk beforehand and prevent them is a vital task. 

It is the duty of corporate finance to evaluate all the risk factors involved while making any financial decision to minimize or eliminate them. Corporate finance needs to carefully assess and manage any kind of risk exposure. It also requires tools and techniques to deal with such risks efficiently.