Corporate/Business
finance is the task of sourcing money for a company's activities. It
involves the balancing of risk and profitability. Long-term business
funding is provided by ownership equity and credit. The long-term
financial decisions make up the company's capital structure. Short-term
funding is often referred to as working capital. In many cases the working
capital is found through a bank line of credit.
Most long-term business credit is
found in the form of bonds. Borrowers package their debt in the form of
bonds. The borrower will receive money by selling a bond, which will be
repaid with interest. The purchaser of the bond can resell the bond at any
time.
Businesses are also concerned with
investments and fund management. Businesses invest in assets that will
maintain or increase in value. Investment management involves the choosing
of a portfolio. To management the investment, the company must decide how,
when, how and in what to invest.
In managing investments, one must:
" Identify objectives, goals,
constraints, time limitations, risk acceptance and tax considerations.
" Identify the proper investment strategy. For example, active
versus passive.
" Measure portfolio performance and manage the
investments wisely.
