finance

(noun)

the science of management of money and other assets

Related Terms

Examples of finance in the following topics:

  • Financing Company Operations

    • A company can be self-financed or financed through the solicitation and participation of outside investors.
    • Examples of bootstrapping include: Owner financing, sweat equity, minimization of the accounts receivable, joint utilization, delaying payment, minimizing inventory, subsidy finance, and personal debt.
    • Examples of Bootstrapping: Owner financing Sweat equity Minimization of the accounts receivable Joint utilization Delaying payment Minimizing inventory Subsidy finance Personal Debt
    • A company can be self-financed or financed through the solicitation and participation of outside investors .
    • How a company is financed has implications for how profits and potential liabilities are distributed

  • The Importance of Finance

    • Managerial finance concerns itself with the managerial significance of finance.
    • Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make those decisions.
    • The primary goal of corporate finance is to maximize shareholder value.
    • Although it is in principle different from managerial finance, which studies the financial decisions of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to financial problems of all kinds of firms.
    • The terms corporate finance and corporate financier are also associated with investment banking.

  • Financial Plan and Forecast

    • Achieving the goals of corporate finance requires that any corporate investment be financed appropriately.
    • The sources of financing are capital self-generated by the firm and capital from external sources, obtained by issuing new debt and equity.
    • The financing mix will impact the valuation of the firm (as well as the other long-term financial management decisions).
    • Management must identify the "optimal mix" of financing—the capital structure that results in maximum value.
    • Management must attempt to match the long-term financing mix to the assets being financed as closely as possible, in terms of both timing and cash flows.

  • Alternate Sources of Funds

    • The cash flow statement, which shows cash inflows and outflows for a specific reporting period and distinguishes between three types of activities that generate or use cash: operating, investing, and financing.
    • Financing activities include the inflow of cash from investors, such as banks and shareholders.
    • Other activities which impact long-term liabilities and equity of the company are also listed under financing activities, such as:
    • The cash flow statement shows cash inflows and outflows for a specific reporting period and distinguishes between three types of activities that generate or use cash: operating, investing, and financing.

  • Equity Finance

    • Companies can use equity financing to raise money and/or increase shareholder liquidity (through an IPO).
    • Financing a company through the sale of stock in a company is known as equity financing.
    • Alternatively, debt financing (for example issuing bonds) can be done to avoid giving up shares of ownership of the company.
    • Unofficial financing known as trade financing usually provides the major part of a company's working capital (day-to-day operational needs).
    • According to finance theory, as a firm's risk increases/decreases, its cost of capital increases/decreases.

  • The Role of Financial Managers

    • Financial managers ensure the financial health of an organization through investment activities and long-term financing strategies.
    • These projects must also be financed appropriately.
    • Capital investment decisions thus comprise an investment decision, a financing decision, and a dividend decision.
    • Achieving the goals of corporate finance requires that any corporate investment be financed appropriately.
    • An understanding of international finance and complex financial documents also is important.

  • Inadequate or incorrect marketing, cooperation, finance, or HR strategies

    • Growth is also at risk if start-ups fail to develop strategic planning, marketing, financing, risk management, HR management, organization, or policies for internationalization.
    • Growth mistakes made in regard to marketing, financing, and HR management are particularly serious.
    • A third group of flawed growth strategies concerns the financing of growth.
    • In the initial phases of the life cycle of start-ups, growth can scarcely be financed out of their profits, nor can it generally be financed alone by the founders' equity.
    • To finance growth strategies start-ups sometimes borrow long-term debt which is to be paid back with interest from the revenues from implementing the strategy.

  • Mergers and Acquisitions (M&As)

    • M&A refers to the aspect of corporate strategy, corporate finance, and management dealing with the buying and selling of companies.
    • Mergers and Acquisitions (M&A) refers to the aspect of corporate strategy, corporate finance, and management dealing with the buying and selling of different companies and similar entities that can help an enterprise grow rapidly.
    • Mergers and Acquisitions (M&A) refers to the aspect of corporate strategy, corporate finance, and management dealing with the buying and selling of different companies and similar entities that can help an enterprise grow rapidly.

  • The Imperative of Liquidity

    • Another purpose of this statement is to report on the entity's investing and financing activities for the period.
    • The statement may show a flow of cash from operating activities large enough to finance all projected capital needs internally, rather than having to incur long-term debt or issue additional stock.
    • Effects on an enterprise's financial position of both its cash and non-cash investing and financing transactions during the period (disclosed in a separate schedule).

  • Short-Term Loans

    • For smaller businesses, financing via credit card is an easy and viable option.
    • It is interim financing for an individual or business until permanent or next-stage financing can be obtained.
    • Bridge loans are typically more expensive than conventional financing to compensate for the additional risk of the loan.
    • Bridge loans are used in venture capital and other corporate finance for several purposes:
    • As a final debt financing to carry the company through the immediate period before an initial public offering or acquisition.