The concept of business finance encompasses all processes that aim to decide the destination of the company’s money. When applying it in their business, the administrator will seek to optimize their investments, making the enterprise manage to increasingly increase its profitability.

This tool acts on three fronts:

• First: How your capital should be distributed within the company. In order to keep it running, in addition to identifying where you can reduce your expenses and increase your profit;
• Second: How will she get her capital. Whether through the production of goods, provision of services, bank loans, investments in smaller companies, etc. and
• Third: What is the destination that the profits obtained should take, aiming to further increase the company’s equity and increase the value of its shares.

And from the moment a company starts planning the use of its finances, seeking to increase its profits and investing in its structures, its market value will increase. In this way, the project will move towards greater recognition in the investment world.

Who should learn about the concept of business finance?

As any company or organization depends on financial resources to function, be it public; private or non-governmental organizations.

Therefore, the concept of business finance can be learned and applied to all types of businesses, regardless of their size.

How does the corporate finance department work in a company?

Starting from the companies’ flowchart, which presents all the departments that make the operation of the enterprise possible, the corporate finance sector ends up assuming a central role. This office has the function of supervising the use of money.

In this way, all activities that bring together economic resources – which are practically all carried out in the company, but certainly involve the main ones – must pass through the scrutiny of those responsible for their sector.

The front line of this division is to optimize the production and sale of products or services that the company offers its consumers.

What are the company’s decision levels?

In detail, let’s understand that corporate finance has the power to define what will be done with the company’s capital in, mainly, three lines:

• Investment Decision: In what and how the business will distribute its capital;
• Financing Decision: which agents will be sought to provide the company’s capital and
• Dividend Decision: how the profits earned will be distributed to investors or invested in improving the business itself.

In recent years, companies have taken advantage of a lot of software that can organize financial data, generate reports. And contribute to decisions being taken faster and more efficiently.

Corporate finance and the world of stocks

To understand how corporate finance impacts the value of your business, let’s understand how the world of stocks works and the process by which your company must enter this scope.

First, let’s deal with so-called active investments. They are those that the company makes, either in the short term (known in accounting language as circular assets) or those made in the long term (classified as fixed assets).

Important detail!!!

Long-term investments or investments that the entrepreneur still plans to invest in enter the accounts. Although it seems strange, it is necessary to remember that the world of stocks is guided by negotiations and speculations. Making the next steps is also relevant for the valuation of a company.

The financing of these investments comes from investors or financial institutions. As a way of attracting them and enabling a return on invested capital, the venture may present a residual claim on what the company achieves with its own capital.

The company can also offer, as an advantage, the payment of interest on the cash flow (inflow and outflow of capital) generated by its investments.

When those responsible for an enterprise decide to apply the knowledge and methods of corporate finance, they enable the company to use this invested capital more consciously. What most of the time will bring good results in the short term for your cash.

Be cautious and build a positive image in your market

By showing itself to be cautious and competent in investing the capital received, a company builds a positive image in its market. What will cause your shares to increase in price? And that more investors want to deposit money and trust in its performance.

Another point that must not be forgotten is the fact that we live in a globalized world. What requires that care with the market and the investments to be made are thought out. And analyzed with a view to the international context.

If the company still has any interest in expanding its business across national borders. It is essential to keep an eye on trade treaties and international legislation, as well as the countries in which you want to act. As well as being aware of taxation and exchange rate issues.

Wrapping up.

After reading this article, you already know that the concept of business finance is important for any type of business. Because when dealing with economic issues, you have the administration of the company in your hands.

Applying it to the management of your business allows you to make better use of your capital. Plus, you’ll also know where it’s going, identify and reduce expenses to increase your revenue.

So, naturally, your business will be put on the path to success. And you will see him valued in the stock world. Bet on corporate finance and see your company be the difference in the market!