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A business is defined as something that ultimately has a profit motive behind its actions. Any business or corporation wants to continuously grow and offer its customers services and products that are always improving. They must, however, achieve these goals at the same time as trying to keep their costs as low as possible. For this function, a company’s corporate finance department is the solution. This department will look at what the future of the company is expected to hold and try to get the most out of the path ahead.

The Chief Financial Officer or the CFO has the main responsibility for a company’s corporate finance function. At first look, the CFO’s job may look simple and defined. The overriding goal for a CFO is to maximize the price of firm’s stock shares. This seems like a very specific goal and stock prices are readily available for anyone to measure the degree and extent of success. However, in reality, the job is quite complex when the CFO has to balance various intertwined financial factors that have an impact on the overall performance of a company and the value of its stocks.

Depending on the Nature of a firm, there are around five to ten major financial functions that have to be managed in harmony to carry out the company’s corporate finance functions. Companies that are hiring for future leadership positions in corporate finance will often have new employees work in jobs that are ‘rotational’ in nature for about two to three years. The idea is that these future leaders will need to gain exposure to several different financial functions in order to work closely with or to actually become the Chief Financial executives who have to deal with a complete system of ideas. There are two main sub functions of Corporate Finance. These are: The Capital investment Function and The Financing Function.

The Capital investment function primarily deals with using the capital resources that the company has at its disposal and investing that money in the right kinds of securities to get the maximum possible profit. The CFO works with the various strategic managers in the company to figure out how the corporate strategic policy will be affected by the various financial principles at play. The capital investment function deals with investments ranging from new products/services in new markets to buying off an entire company as an acquisition to add to the corporate portfolio.

Whether it is a small or a large investment the company is trying to make, their strategy will depend heavily on cash flows and expected cash flows. They will be paying a lot of attention to the Net Present Value of their investment proposition as well as the Internal Rate of Return that the investment is going to give them. Firm’s will continue to be successful in their investment decisions as long as they pursue projects where their internal rate of return is more than the market rate of return and the Net Present Value of the investment is greater than zero.

The Financing function relates to how a firm will need to raise capital from the financial markets. The CFO must ultimately decide when a firm should ‘go to the markets’ and what the securities are that it should issue in order to raise that money. Investors will buy securities from the company and thus supply the needed capital to it. Investors are basically trading current cash o capital for future flows. The CFO must be able to perceive how investors will react to different types of security offerings because this will impact what price investors will be willing to pay for stocks and bonds and how much capital the firm will be able to raise.

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