It is 9 am. The work day has begun. Company employees are entering offices and settling down to do their jobs. Professionals are writing sales reports, contacting clients, purchasing inventory and working towards their targets. At the centre of all these activities is the corporate finance team. These finance experts lay down a blueprint for every financial decision. They create budgets, allocate funds, monitor expenses and transactions, analyse financial statements, seek investment opportunities and fulfil every financial need of the company.
The corporate finance professional bears a lot of responsibilities. Without them, the company would be in disarray and financial chaos. All companies lean on corporate finance experts to help them manage their finances better and enhance profits.
In a nutshell, corporate finance is the financial management of companies. The bigger picture, however, is far more complex. To understand the importance of corporate finance and why it is the vital lifeline of any business, Stay on this page as we delve deeper into this field.
The importance of corporate finance for business success
Why are corporate finance experts so revered within a company? There are many reasons. They are the professionals who look after the general fiscal management of a business, monitor expenses and transactions, and financially empower the organisation. That’s not all. Here are a few more reasons:
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Helps to make better business decisions
Every decision made has to be backed by research and reasoning. More importantly, is it financially feasible? Are there monetary risks involved? Can the company afford to take this chance?
These questions highlight the importance of corporate finance. The professionals analyse and examine all the financial data. They incorporate their knowledge, skills and tools to predict possible outcomes. If the company is investigating investment options, corporate finance can help find those with the best risk-return ratio. If there is a budgeting crisis, professionals can source funding or redistribute capital as they see fit. They use strategic manoeuvres to keep the wheels of the business turning smoothly and seamlessly through financial expertise.
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Optimises utilisation of financial resources
Behind every successful business is a corporate finance department hard at work. These professionals understand the various requirements of the company and can skillfully assign funding. This is an art as sometimes the capital is limited, but the demands on it are not. Corporate finance experts diligently work to find various financial sources. They have to figure out ways to use those funds to maximise profits and productivity. Companies that never underestimate the importance of corporate finance always ensure they hire highly qualified personnel. Despite the challenges, this line of work can be immensely satisfying and stimulating.
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Enable funding for expansion
Very often, company leaders want to explore various growth opportunities. They may want to hire more employees, open up new branches or access diverse markets. No decision can be made without the corporate finance team. These professionals work on the funding. The finance experts use financial planning and strategic methods to figure out where and how to get the money. They can opt to redesign budgets, use returns from investments or apply for loans, all while ensuring that none of the other business departments suffer from a lack of funding. Business expansion plans can really help you appreciate the importance of corporate finance.
Also Read – Skills Required for a Corporate Finance Professional
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Manage debt and equity
One of the main responsibilities of corporate finance is to ensure a healthy capital structure. Professionals have to analyse equity and debt financing for the company. If they choose debt financing, they take loans from banks. Too much debt can have its own share of concerns. In equity financing, corporate finance professionals generate capital by selling company shares. This could result in a dilution of the company’s shares.
So what is the best option? That is for the corporate finance team to decide. They analyse all the risks and concerns associated with debt and equity, before finalising a plan that works in the company’s best interest. The importance of corporate finance is evident in the role it plays in raising capital from various sources.
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Creates financial forecasts
Businesses can’t afford to take risks. Every decision about the future must be analysed, researched and planned strategically. Companies want to make accurate projections to avoid any unpleasant surprises or unexpected risks. Corporate finance creates financial forecasts using various tools such as financial modelling. This helps to make better decisions about allocating funds, anticipating cash flow and enhancing company performance.
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Reduces company costs
As anyone who has ever run a company will tell you, cost-cutting measures are a stepping stone to profitability. And which team is at the helm of every cost reduction? You guessed it, corporate finance! However, this doesn’t mean they lower budgets aimlessly. It takes careful planning, accurate financial analysis and skilful fund allocation to ensure every rupee is spent in the right place. Corporate finance professionals also negotiate with vendors, look for bulk discounts and monitor inventory to ensure minimal expenses.
All these measures help to improve the bottom line and speak volumes about the importance of corporate finance.
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Identifies risk factors
“Let’s jump without looking” is a mantra no one in business would follow. You wouldn’t steer your ship in uncharted waters without a map. While risks are a part and parcel of every business, corporate finance professionals help to identify and mitigate financial risks. First, they understand these potential threats, whether it is a volatile market condition, an economic recession or a lack of liquidity. Then they develop strategies and financial plans to overcome these risks and prevent the company from incurring losses. There are preventive procedures in place, such as risk-measuring models and frameworks, that keep track of any irregularities or concerns. Keeping the company safe and secure is another point that highlights the importance of corporate finance.
Benefits of a career in corporate finance
Since we’ve established the importance of corporate finance in the above points, now let’s talk about how it can be a great career move for you.
- Corporate finance offers great salaries, an engaging work environment and exciting opportunities for your career.
- There is immense scope for career advancement. In fact, many CFOs start in corporate finance.
- There is a healthy work-life balance as you work during regular hours, and get paid leave and official holidays.
- You also have job security, as corporate finance is a very stable profession and still very relevant.
How Proschool prepares you for a career in corporate finance
It isn’t exactly an industry secret that corporate finance is a highly coveted profession. If you want to work in this field, Proschool has some exceptional finance courses to help you become a corporate finance professional. CFA professionals are preferred by many top companies for jobs in the corporate finance department. The CFA course is taught by industry specialists who help students learn important finance concepts and skills through innovative learning methods.
Proschool also has the Investment Banking Operations course, which offers holistic education in finance. The financial modelling program is also ideal for corporate finance professionals as it teaches a practical, industry-centric skill.
So why should you learn any of the courses from Proschool? As one of India’s top coaching institutes, Proschool has a good track record of getting students ready for jobs in finance. Professors help students break down complex theories, learn real-world applications and study relevant concepts, such as the importance of corporate finance.
Proschool also offers the following features:
- Classroom-based facilities across major cities in India
- Online sessions are also available.
- Students get access to mock tests, practice papers, an e-learning library, prep books and other helpful resources.
- Proschool has an effective placement program that offers students entry-level jobs in various finance fields, such as corporate finance.
- You also receive proper recruitment training in conducting interviews and writing resumes.
FAQs
What is the main objective of corporate finance?
The main objective of corporate finance is to manage a company’s finances. This includes budgeting, investments, tax payments, sourcing capital and executing strategic plans to boost profitability.
How much do corporate finance professionals earn?
In India, annual salaries for corporate finance jobs start at around Rs 3 lakhs for freshers and can go as high as Rs 50 lakhs for experienced professionals. On average, employees earn Rs 10 lakhs a year.
(Source: ambitionbox.com)
Why should I join corporate finance?
If you have an analytical mind, an affinity with numbers and a passion for finance, this is the right field for you. If you are planning on taking the CFA program, you will do very well in corporate finance as the course training is well suited for this line of work.
Do CFA holders do well in corporate finance?
Absolutely. The CFA program is perfect for corporate finance professionals as it has a comprehensive syllabus in important finance subjects such as quantitative methods, economics, equity investments and many others. CFA holders also learn about the importance of corporate finance.
Why is corporate finance important to all managers?
Corporate finance helps managers plan projects, secure financing, set budgets and create strategic plans. Without the funds granted by corporate finance professionals, managers would have a tough time getting any project started.
Why is corporate finance important in decision-making?
Corporate finance experts help businesses evaluate investment options that yield the best returns. They weigh the risks and analyse different opportunities, enabling the company to make decisions based on their findings. Experts also find the best avenues for securing funding and then make recommendations to the company heads. They play a critical role in decision making and that is the real importance of corporate finance.
Conclusion
You can’t doubt the importance of corporate finance and the tremendous impact it has on the business world. From the top global companies to small start-ups, every organisation can benefit from having a competent corporate finance team. If you want to be a part of this exciting and fulfilling profession, you can get started today. The right finance credentials can help you kickstart your career and become a major finance player in the industry.
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