6 Types of Corporate Finance: A Comprehensive Guide

If you’ve decided that corporate finance is the perfect fit for you, welcome to your future. You are about to embark on an exciting journey into a highly lucrative profession. Corporate finance is the backbone of any company. It helps maintain financial stability, manage various expenses, create viable budgets and, most importantly, corporate finance ensures there is always a steady cash flow within the organisation.

No matter the size or net worth of the company, a corporate finance team is a valuable addition.

Did you know that there are several types of corporate finance? This post will delve deeper into them and examine all the features and responsibilities so you get a better idea and understanding.

Different types of corporate finance

We are now getting into the specifics of corporate finance. What are the different functions and responsibilities? What tasks and activities do professionals perform when at work? Let’s take a closer look.

1. Equity financing

Organisations often need to raise more capital for various short-term or long-term projects. Instead of taking loans, they sell company shares to gain funds. Corporate finance professionals help to issue shares and find interested investors or venture capitalists.

Job responsibilities in equity finance:

• Research the stock market, economic trends and the company’s financial data.
• Use financial modelling to make investment-related decisions.
• Calculate the valuation of a company’s IPO.
• Analyse data on securities, funds, stocks and other assets.
• Create reports or presentations.

2. Debt financing

When raising funds for various purposes, corporate finance experts can choose from several financing options. One such possibility is debt finance, in which they apply for a loan to borrow money from banks or financial firms. The company and bank agree on an interest rate and periodic payment plans before the loan is sanctioned.

Job responsibilities in debt finance:

• Creating financial models to evaluate debt finance.
• Drafting a pitch or presentation for banks or financial institutions.
• Working on financial analysis and research.
• Negotiating the finer details of the deal.

Also Read – Corporate Finance Jobs: Roles, Salaries, and Growth

3. Mergers and Acquisitions

When companies decide to merge or acquire smaller organisations, they bring in experts to help them plan and secure the deal. Corporate finance experts handle such projects and offer their valuable expertise to the company.

Job responsibilities in mergers and acquisitions:

• Identify and research potential companies for M&A deals.
• Investigate the financial background of the companies for sale.
• Carry out the due diligence to ensure the authenticity of all financial data.
• Make presentations and reports for upper management and shareholders.
• Offer input and advice during the negotiation rounds.
• Create M&A financial models for financial planning.

4. Asset-backed financing

When companies need capital, they have the option of seeking asset-backed financing. This is a type of short-term loan where the company assets are used as collateral. Organisations can include their inventory, infrastructure, properties and other similar assets when seeking loans.

Job responsibilities in asset-backed financing:

• Create and assimilate finance statements and reports for review.
• Follow the guidelines and regulations set by the banks or financial institutions.
• Analyse the company assets and make recommendations to the management.
• Use financial modelling to create cash flow and credit models.

Also Read – 6 Reasons Why Corporate Finance is Key to Business Success

5. Initial Public Offerings

When a company goes public, a corporate finance expert will help the organisation arrive at an accurate valuation for its IPO or initial public offering. Investors can buy shares of the company, and the money received by the company is used for various investment purposes.

Job responsibilities for creating IPOs:

• Ensuring all financial statements are accurate and in compliance with various guidelines.
• Following the pre-IPO legal structures as required.
• Collaborating with all company departments during the IPO process.
• Conducting due diligence
• Filing applications on behalf of the company.

6. Leveraged buyouts

Some organisations use debt financing as capital when acquiring a new company. They often use the new company’s assets as collateral when applying for loans.

Job responsibilities during a leveraged buyout:

• Use financial modelling to create forecasts.
• Calculate the free cash flow of the company.
• Make presentations to banks or financial institutions.
• Negotiate rate of debt financing

Also Read – Understanding the core principles of corporate finance

Proschool’s courses that are perfect for corporate finance

One of the best institutes to learn about corporate finance, Proschool offers courses such as CFA, Investment banking operations, ACCA and financial modeling.

These programs offer a comprehensive learning experience in finance, including types of corporate finance.

What sets Proschool apart from other learning centres, is their unique teaching methodologies that offer great results. Students are taught by industry experts who bring their experience of the corporate world into the classroom.

Proschool encourages real-world applications of finance concepts, enhances skill development and provides practical training. Certified students get an edge over their peers when they enter the workforce.

Advantages of learning with Proschool

• Proschool has set up multiple, fully functional learning centres in all the major cities such as Mumbai, Pune, Bangalore, Hyderabad, Kolkata, Delhi, Chennai and many more.
• If it’s not convenient for you to attend these centres, you can enrol for online classes instead.
• Professors use case studies, problem-solving methods and practical approaches to help students learn better.
• The faculty is very supportive of the students, often providing personalised attention and mentorship when needed.
• Proschool offers easy access to mock tests, practice papers, prep books, learning videos and many other study resources.
• You also receive training for the recruitment process, with a special focus on interview etiquette and resume writing.
• Once certified, you can apply for jobs on Proschool’s placement portal.

Finance courses at Proschool:

• CFA

  • CFA is one of the most globally renowned qualifications in the finance and investment industry.
  • The CFA charter is recognised in over 160 countries.
  • Job profiles for CFA students include equity analyst, investment banker, finance analyst, finance manager and many more.
  • Subjects include equity investments, quantitative methods, portfolio management, economics, ethics and professional standards.

• ACCA

  • ACCA is one of the top accounting certifications in the world.
  • The ACCA program is recognised in over 180 countries.
  • Perfect choice for management accountants hoping to work in corporate finance.
  • Subjects include financial reporting, taxation, financial management and management accounting.

• Investment Banking Operations

  • Investment Banking is an excellent, well-rounded course for students who want to learn about finance and investments.
  • The syllabus includes subjects like corporate finance, equity research, financial modelling, mergers & acquisitions and corporate finance.

• Financial modelling

  • Financial Modeling is one of the most relevant skills in the finance industry.
  • A financial modelling course teaches you to create various models using spreadsheet software such as MS Excel.
  • Corporate finance professionals use financial modelling to analyse and sort financial data.

FAQs

• What are the main objectives of corporate finance?

Corporate finance is also known as the general financial management of a company. The main objectives are to enhance the value of the company, optimise the use of funds and resources and access various investment and wealth-building opportunities.

• How can I get into corporate finance?

If you are a qualified and skilled candidate, your chances of getting recruited by one of the top companies are good.

You will need one or more of these qualifications:

• CFA
• MBA Finance
• ACCA
• Investment Banking Operations
• Financial modelling

You also need to ensure you have the relevant skills such as:

• In-depth knowledge and understanding of the finance industry
• Analytical and critical thinking
• Mathematical skills
• Problem-solving skills
• Good communication
• Quantitative skills
• Researching abilities

• What are the job profiles in corporate finance?

Depending on your area of expertise, you can work in various types of corporate finance roles, such as:

• Corporate financial analyst
• Equity analyst
• M&A manager
• Management accountant
• Corporate accountant
• Investment banking analyst
• Financial manager
• Company treasurer
• Financial planning and analysis manager

• Is the CFA the best course for corporate finance?

The CFA course offers one of the best finance certifications in the world. The syllabus includes relevant topics such as types of corporate finance, economics, portfolio management, quantitative methods, financial statement analysis and equity investments. Some of the top finance experts are CFA holders, as this course prepares you to take on leadership roles.

• Why should I choose corporate finance?

If you are inclined towards a finance career, have superior analytical and problem-solving skills and want to be at the centre of a company’s business and financial operations, then corporate finance is the perfect profession for you. Working in this field will also give you high remuneration, job stability, career opportunities and a healthy work-life balance. If this sounds appealing to you, then go for it!

Conclusion

Corporate finance is an evolved and complex term for an umbrella of financial functions and processes. Many types of corporate finance responsibilities require a high calibre of skills and professional training. Courses like the MBA or CFA are perfect for transforming students into corporate finance experts. You need to be proficient in quantitative methods and financial modelling, with a firm understanding of the investment industry. Once you have achieved your certification, you can confidently enter this vibrant and lucrative field.