Corporate Finance deals with the financial aspects of a corporate enterprise, right from the stage of promotion of the organization. It includes administration during initial stages, stages of growth and expansion. It also deals with financial restructuring during financial crisis.
Corporate Finance includes financial environment, strategies of financial planning, financial markets, capital formation & financial institutions. Corporate finance is concerned with the efficient and effective management of the finances of an organisation in order to achieve the objectives of that organisation. This involves planning and controlling the provision of resources (where funds are raised from), the allocation of resources (where funds are deployed to) and finally the control of resources (whether funds are being used effectively or not). The fundamental aim of financial managers is the optimal allocation of the scarce resources available to them – the scarce resource being money.
Corporate finance theory therefore draws heavily on the subject of economics. The discipline of corporate finance is frequently associated with that of accounting. However, while financial managers do need to have a firm understanding of management accounting (in order to make decisions) and a good understanding of financial accounting (in order to be aware of how financial decisions and their results are presented to the outside world), corporate finance and accounting are fundamentally different in nature. Corporate finance is inherently forward-looking and based on cash flows: this differentiates it from financial accounting, which is historic in nature and focuses on profit rather than cash. Corporate finance is concerned with raising funds and providing a return to investors: this differentiates it from management accounting, which is primarily concerned with providing information to assist managers in making decisions within the company. However, although there are differences between these disciplines, there is no doubt that corporate finance borrows extensively from both.
