What Are the Functions of Finance in the Business World?
Business finance, also called corporate finance, is the process companies go through when making business decisions. Most companies use corporate finance to decide on using outside funding for major capital acquisitions.FactsEach year companies create capital budgets to decide what areas of their business operations need upgrading or expanding. Once the capital projects are chosen, executive management will decide on the financing methods needed for the project.ConsiderationsCompanies will develop an investment strategy to see which financing method offers the most benefits for the capital project. Using current cash flow for capital project financing is a poor choice, since this cash is used for daily operations.TypesThree types of corporate financing are typically used: bank loans, bonds and equity. These methods are chosen using theoretical formulas to estimate the rate of returns companies will receive using each method.Theories/SpeculationThe Capital Asset Pricing Model (CAPM) or
