The Essentials of Corporate Finance
Everyone uses finance at some point in their lives when they need capital supplied by another. Often, this term is used for the study of economics and how money is controlled. A more general and accepted definition is the control of business plus public sector assets and money. This of course requires the use of specialist trained in money matters often referred to as finance managers.
These managers arrange funds to be lent to individuals or business using their company's assets where possible and if not sourcing the money elsewhere. The whole basis of optimization is to enable the maximum return from your finance whilst ensuring the cost to arrange it stays at a minimum.
Poor finance is the cause of depressed markets caused when managers have not followed the optimization rule which leads to lower production and lower sales globally. It is for this very reason that finance managers are very careful with finance they agree too and where it is funded from.
A well know marketing and management guru Lee Iacocca said that finance managers always looked at the cost involved in a finance deal and not the future return. The big difference between finance managers and sales managers is the direction they are facing; a sales manager is looking forward, towards the future. Many small business owners forget that the business loan they have arranged is not for personal use; a distinction which gets blurred regularly. When money is lent under these circumstances, lenders feel quite aggrieved as they have lost control of where the money is being invested.
By stopping business borrowing this way it is hoped they will start to see the importance of maintaining good practices which should help with investment later on. However, small businesses can finance their needs from other sources like friends or from banks and private lenders.
Finance managers can help improve their company's profits by using external sources which also lessens the risk on them at the same time. Bob Hope once said that you can only get a loan from a bank if you can prove to them you have absolutely no need for it; advice which could not be more true. But always make sure that you review all that you do with your finances, to try not to make the wrong decisions.
Article Source: FxTradingStock.com
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by: Mary Maseko
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Word Count: 396
Date: Sun, 2 Jan 2011
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