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What Is Corporate Financial Management?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 20 November 2016
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Corporate financial management refers to the various methods an organization or a corporate entity may apply to help it realize its stated financial objectives and goals. Businesses are usually started with goals and various targets in mind. These goals and targets usually change and increase as the company grows and begins to diversify. A good corporate finance regimen will help the company stick to its core financial objectives and also help the company achieve, or even surpass, its financial targets. Some of the issues or factors of corporate financial management include decisions about capital investment, how to raise and manage funds, and how to properly manage inventory.

Decisions regarding capital investment refer to one of the principal financial decisions a company must make. Companies usually invest in capitals with the intention or hope of gaining more than the original investment from the capital over time. An example of such a capital is a production plant that may include the land, buildings and equipment inside the structure. This is a part of corporate financial management because the production plant will yield returns over time through its usefulness in the production of merchandise.

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Another aspect of corporate financial management is the corporate attitude regarding employees. A company cannot run itself, and must depend on the right mix of employees with the requisite experience and knowledge to effectively steer the company toward the realization of its goals. To this end, the company must make financial decisions regarding how much it is willing to pay its employees. Since a company is only as good as its employees, it might decide to recruit the very best in the field — a move that is capital intensive in terms of remuneration and allowances. The company must also spend money too further train the workers, which usually pays off in terms of increased productivity and employee effectiveness.

Other objectives of corporate financial management include the monitoring of the inflow and outflow of cash through accounting and bookkeeping. Companies must conduct periodic reconciliation of their accounts in order to discover if there is a right balance between cash inflow and the company expenditure. Inventory management is an aspect of corporate financial management that involves a careful monitoring of the company inventory with a view to minimizing wastes. Companies may also look for ways to reduce the money spent in the procurement of raw materials and other inventory, which may include looking for alternative supply sources.

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