Corporate Finance

• Corporate finance consists of tools, strategies and the analytical framework that an organization relies on to fund its activities. All organizations -- including charities and government agencies -- use financial procedures to ensure that operating strategies are appropriate, depending on business needs. For corporate finance personnel, the order of the day is to make sure the firm has enough cash to pay for day-to-day expenses without depleting long-term, rainy-day liquidity reserves.
  
  

Significance

• In the corporate setting, financial activities enable department heads to prevent the operational standstill that often comes with insufficient cash flows. Usually a tell-tale sign of moribund sales or poor financial planning, a lack of funds presents business unit chiefs with various challenges, most notably the inability to pay vendors and hire qualified personnel. To avoid the doldrums associated with deficient cash flows, top leadership reviews liquidity movements in various business units, focusing on how these individual cash flows affect total amounts in corporate coffers.
  
  

Investment Banking

• Investment banking professionals help companies meet their liquidity needs, with an emphasis on how to fund long-term projects. By helping businesses and governments raise money, investment bankers provide the platform necessary to spur economic growth. A company may raise cash on financial markets or in private transactions. Financial markets, also known as securities exchanges, include the New York Stock Exchange and London Stock Exchange. Publicly listed firms may sell stocks or bonds, among other products. In private transactions, a company discusses loan arrangements directly with a group of institutional investors, such as banks, insurance companies and private-equity funds.
  
  

Importance

• Investment banking plays an important role in the economy. In addition to helping companies raise cash, investment bankers provide guidance in a string of activities. These include mergers, acquisitions and divestitures, which are transactions in which companies sell business units. Investment banking permeates other facets of the economic sphere, helping individuals reach retirement goals through wealth-advisory services.
  
  

Relationship

• Corporate finance is distinct from investment banking, but both concepts often interrelate. The primary objective of investment banking is to help companies raise cash, a goal that stands atop the list for corporate finance professionals. To carry out their tasks adeptly, investment bankers rely on performance metrics and operating indicators. Also known as financial ratios, these metrics enable investors to come to terms with a company's economic status.