Here you will learn everything you need to know about corporate finance, such as what it is and how it works. 

What is corporate finance? 

Corporate finance is concerned with the ways in which companies maximize returns for their shareholders. Examples of components of corporate finance are financing, takeovers, capital structure and to balance risk and potential return. 

What is a corporate finance strategy? 

A corporate finance strategy is an approach that aims to maximize returns for investors. There are many different corporate finance strategies, as we explain below. 

The 8 most common corporate finance strategies

Below we give you examples of eight common corporate finance strategies.

1. Investments, i.e. where the company chooses to invest its money, for example in research, development, purchasing machinery or hiring new staff. 
2. Financing, i.e. how the company gets capital to finance its investments. Two common types of financing are loans and new issues. 
3. The capital structure, which is the balance between the company's debt and equity. 
4. Cash flow management, which is the company ensuring that they have enough capital to run their business. 
5. The dividend policy, whereby the company decides how much of its profits to distribute to shareholders. Sometimes companies may choose not to have any dividends at all. 
6. Mergers and acquisitions, where the company decides to either merge with other companies or buy up other companies. 
7. Financial planning, which is about forecasting and budgeting for future financial goals. 
8. Share buy-back, where a company buys back its own shares from the market to increase both the value and the return per share.

Real examples of corporate finance strategies

• To do like Tesla, which is to finance its expansions with a mix of equity and bonds. 
• To do like Apple, which is to regularly buy back shares to increase the value per share and the return per share. 
• To do like Amazon, which is to reinvest large parts of its profits to enter new markets, instead of paying large dividends to shareholders. 

Frequently asked questions

Below we provide you with answers to frequently asked questions related to corporate finance.

Are business finance and corporate finance the same thing? 

The concepts are intertwined, but they are not the same thing. Corporate finance is a narrower concept that mainly deals with the capital structure of the company, i.e. debt and equity, while corporate finance also deals with the allocation of the company's resources. 

Why is corporate finance important?

Corporate finance is essential for companies to grow and generate returns for their shareholders. Without effective corporate finance strategies, it is difficult for companies to even survive, which ultimately affects both employees and investors.