Corporate Finance?

[Guest]

A lot of posters say they want to do corporate finance or they work in corporate finance - what does corporate finance generally mean? Sorry, as you can tell, I don't have much of a finance background :).

[MBAApply]

In plain English, corporate finance is basically the group or department in a large company that manages the company's capital (otherwise called "money" in plain English, but "capital" just makes it sound less uncouth). The accounting department collects and produces the raw financial data -- data which the corporate finance department then uses to make decisions on how much/when to raise more money (if the company is expanding), how to raise that money (borrowing or selling more shares to investors), and overall budgeting for the company (i.e. how much of the company's money is to be set aside to develop a certain product/project, etc.). Also, for gigantic companies that raise a lot of money at a time, corporate finance will help them manage all that cash (i.e. if the company raises $1 billion by borrowing it, the company may not spend all of it right away, but may spend it over a number of years -- so rather than stick all of that cash in a bank account, the corporate finance department usually helps decide how that cash is invested - i.e. some in cash, some in CDs, others in bonds, others in stocks, etc).

Corporate finance depts also deal with the investment bankers. Investment bankers are basically like real estate/mortgage brokers - but rather than helping to broker the sale/purchase of a property for a % fee, investment bankers broker the sale/purchase of companies for a % fee (otherwise called mergers & acquisitions). They are also kind of like mortgage brokers except that rather than helping a homeowner find financing, investment bankers will help companies find financing (selling shares to the public, finding investors to put a % stake, helping the company issue bonds, etc.).

Alex Chu
alex@mbaapply.com
www.mbaapply.com
http://mbaapply.blogspot.com

[BizBlogged1]

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