Editing Finance (section)

===Corporate finance===
{{Main|Corporate finance|Financial management}}
{{further|Strategic financial management}}
Corporate finance deals with the actions that managers take to increase the value of the firm to the shareholders, the sources of funding and the [[capital structure]] of corporations, and the tools and analysis used to allocate financial resources. While corporate finance is in principle different from [[managerial finance]], which studies the [[financial management]] of all firms rather than corporations alone, the concepts are applicable to the financial problems of all firms,<ref name="Drake_Fabozzi">Pamela Drake and [[Frank Fabozzi]] (2009). [https://media.wiley.com/product_data/excerpt/52/04704073/0470407352.pdf What Is Finance?] {{Webarchive|url=https://web.archive.org/web/20230223003858/https://media.wiley.com/product_data/excerpt/52/04704073/0470407352.pdf |date=2023-02-23 }}</ref> and this area is then often referred to as "business finance".

Typically, "corporate finance" relates to the ''long term'' objective of maximizing the value of the [[Enterprise value|entity's assets]], its [[stock]], and its [[return on equity|return to shareholders]], while also [[Risk–return spectrum|balancing risk and profitability]]. This entails<ref>See [[Aswath Damodaran]], [http://pages.stern.nyu.edu/~adamodar/New_Home_Page/AppldCF/other/Image2.gif Corporate Finance: First Principles] {{Webarchive|url=https://web.archive.org/web/20161017190714/http://pages.stern.nyu.edu/~adamodar/New_Home_Page/AppldCF/other/Image2.gif |date=2016-10-17 }}</ref> three primary areas:
# [[Capital budgeting]]: selecting which projects to invest in—here, accurately [[Corporate finance#Investment and project valuation|determining value]] is crucial, as judgements about asset values can be "make or break".<ref name="Irons">{{cite book |last1=Irons |first1=Robert |title=The Fundamental Principles of Finance |date=July 2019 |publisher=Routledge |location=Google Books |isbn=978-1-000-02435-7 |url=https://play.google.com/store/books/details/Robert_Irons_The_Fundamental_Principles_of_Finance?id=tzr3DwAAQBAJ&hl=en_US&gl=US |access-date=3 April 2021 |archive-date=11 November 2021 |archive-url=https://web.archive.org/web/20211111150837/https://play.google.com/store/books/details/Robert_Irons_The_Fundamental_Principles_of_Finance?id=tzr3DwAAQBAJ&hl=en_US&gl=US |url-status=live }}</ref>
# [[Dividend policy]]: the use of "excess" funds—these are to be reinvested in the business or returned to shareholders.
# [[Capital structure]]: deciding on the mix of funding to be used—here attempting to find the [[Capital structure#Optimal capital structure|optimal capital mix]] re debt-commitments vs [[cost of capital]].
# Working capital management: is concerned about the daily funding operations and the goal is to maintain liquidity, minimize risk and maximize efficiency 
# Cost of capital: consists in understanding how much the firm has to generate to satisfy the investors, they do that by minimizing the weighted average cost of capital (WACC) so the value of the company increases
The latter [[Investment banking#Corporate finance|creates the link]] with [[investment banking]] and [[securities trading]], as above, in that the capital raised will generically comprise debt, i.e. [[corporate bond]]s, and [[Equity (finance)|equity]], often [[stock (finance)|listed shares]]. Re risk management within corporates, see [[#Risk management|below]].

Financial managers—i.e. as distinct from corporate financiers—focus more on the ''short term'' elements of profitability, cash flow, and "[[working capital management]]" ([[inventory]], credit and [[debtor]]s), ensuring that the firm can [[Corporate finance#Working capital management|safely and profitably]] carry out its financial ''and operational'' objectives; i.e. that it: (1) can service both maturing short-term debt repayments, and scheduled long-term debt payments, and (2) has sufficient cash flow for ongoing and upcoming [[operations management|operational expenses]]. (See [[Financial management]] and [[FP&A]].)
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