Corporate finance importance

 1.2 IMPORTANCE OF CORPORATE FINANCE :

In the functional management of business enterprise, importance is given to production,finance, marketing and personnel activities. Among all these activities, utmost importance is given to financial activities. The importance of corporate finance may be discussed as follows - 

1. Helps in decision making : 

Most of the important decisions of business enterprise are determinedon the basis of availability of funds. It is difficult to perform any function of business enterprise independently without finance. Every decision in the business is needed to be taken keeping in view of it’s impact on There may be number of alternatives but the management is required to select the best one which will enhance profitability. Business organisation can give green signal to the project only when it is financially viable. Thus corporate finance plays significant  role in decision making process.

2. Helps in Raising Capital for a project : Whenever a business firm wants to start a new venture, it needs to raise capital. Business firm can raise funds by issuing shares,debentures, bonds or even by taking loans from the banks.

3. Helps in Research and Development : Research and Development must be undertaken for the growth and expansion of business. Detailed technical work is essential for the execution of projects. Research and Development is lengthy process and therefore funds have to be made available through out the research work. This would require continuous financial support.Many a time, Company has to upgrade its old product or develop new product to attract the consumers. For this company has to conduct survey, market analysis, etc.which again requires financial support.

4. Helps in smooth running of business firm : Asmooth flow of corporate finance is  in so that salaries of employees are paid on time, loans are cleared on time, rawm is purchased whenever required, sales promotion of existing products is carrieds out and new products can be launched effectively.