The different topics in corporate finance typically include assets, liabilities, capital investment, and financial risk. These topics are important to those who invest their money in the financial operations of different companies. Assets and liabilities provide the basic foundation for keeping track of all the money that comes into and goes out of a company. Capital investment involves the amount of money or type of capital assets used to make a business or company grow. Risk is typically a term used to describe the different types of financial risks a company may take in order to increase business.
Assets and liabilities are one of the most talked about topics in corporate finance as they often determine the financial condition of a business. Cash and anything else that a company may own are considered assets. These include securities, bonds, raw materials, inventory, and any accounts receivable. Liabilities are various debts for which a company is responsible, including money owed to vendors, leases, mortgages, and employee payroll. The balance sheet shows the total assets and liabilities of a company along with any owner equity to determine the total value of a particular company.
Another of the topics in corporate finance is capital investment. Investors provide money to a business with the expectation of a larger return on their investment over a period of time. Capital investment may also be used for the purchase of fixed assets, like new buildings, manufacturing equipment, or property. While capital investment is not the same as working capital, which is money loaned to a business and used for day-to-day operations, it may be used as working capital. Capital investment money comes from banks, venture capitalists, and equity investors.
Almost every transaction in the world of corporate finance involves some type of risk, but financial risk is one of those topics in corporate finance that may have several meanings. In general, risk is about the probability of financial loss or inability to provide a return on investment due to the operations of a business or economic environment. For some, risk is associated with default on loans. For others, risk may refer to the current value of an investment portfolio that is tied to the volatility of financial markets and that may affect the financial condition of a corporation.
