The hypothesis of a business firm always states that a company is in business in order to make money. Strategic corporate finance is considered as a part of the company which deals with handling money along with the other assets. Through a consistent and good financial strategy a company can reach their profitability goals whilst being compliant with all the applicable laws and principled standards. To become a better investor or manager you need to understand the corporate finance as it will give clues for business strategies.
Basics for strategic corporate finance:
Basically, corporate finance determines how a company would rise, use and invest its money. For example, a company needs to be started, possibly a business for providing content on internet. Firstly an office building is required and workers as well. In addition, to this a few computers having internet connections is also required. To obtain all these physical products to start a business, one thing required is the finance. A strategic corporate finance will encompass the initial investments in equipment, rent, labor and decisions regarding what have to be done with all the revenues generated. Strategic corporate finance will also guide in raising some additional money or probably merging with some other firm in order to get a business expansion done.
The balance sheet of a company will give all the details needed to explain the function of a strategic corporate finance. The basis balance sheet format will demonstrate its finance via its assets as well as liabilities. The assets could be either current or even fixed. A fixed asset will include buildings and machineries, intellectual properties like company slogans or logos, all of these are comparatively long lasting, or various business cycles. A fixed asset can also be tangible such as machines that can be touched or they can be intangible like a brand name. Then are current assets which include inventories as well as cash on the hand, in addition any such asset that is expected to be put to use in a year’s time.
On the other side are the liabilities. These are classified as equity or debt, and represent ways by which the company can raise funds for their operations. Debt means borrowing funds. Equity means wherein the holders of the company equity like stocks have constant income and also in the strategic direction of the firm.
So basically, strategic corporate finance helps the company to generate more money from its investments compared to the money spent to make those investments.