Hello! If you are new to my blog, welcome to my post about the difference between corporate finance and investment banking. I recommend that you also read about how I paid off $40,000 in student loans by the age of 24, and also my monthly income updates where I show how I earn over $10,000 each month working online.
When it comes to business and investments inside a company there are many different features and functions associated with it. Two of these functions include corporate finance and investment banking. While these two areas of finance sound rather similar there are actually many differences between them.
Knowing the differences between corporate finance and investment banking is very important, because the overall economic and operational services required of a firm do vary, and to ensure the kind of cash flow and services available through the company are existent (both short-term and long-term), the company often has to use either corporate finance or investment banking to acquire the funds.
We will discuss the difference between corporate finance and investment banking below.
Corporate finance specifically is a division of a business that handles all of the financial activities of the company.
Through the corporate finance arm of the company, the company gets the money they need for their products or services by borrowing from banks. Corporate finance also makes strategic decisions about when to acquire certain assets and when to pay off liabilities to maximize operations. It is quite similar to budget management.
With corporate finance, there are specific tools and strategies in order to design a framework in which an organization is going to directly rely on while it funds all of its internal activities. It doesn't matter on the kind of business, whether it is a large corporation or a smaller charity, the group must utilize these specific procedures in order to set up financial operations. Most of this often deals with a day-to-day financial aspects of the company, although it also has long-term planning attributes in order to make sure the business stays in the black and on target financially.
With the corporate financing, it is possible for the different heads of sectors inside the business to have a set running financial report that allows the area of the company to know how much money it has available to spend and it is able to monitor what the sector is spending and if there is any kind of poor financial planning attributed to the particular area of the company.
Investment banking is different. The goal of investment banking is to raise capital by taking a company public (Initial Public Offering) or through stock and bond offerings. They also do private placements, which is a process where a private company may choose to borrow a large amount of capital from wealthy individuals and institutional investors. Investment banking is also involved in mergers and acquisitions.
Investment bankers help a particular company determine their financial needs and look almost always towards long-term projects. The investment bankers work with both government agencies and businesses in order to produce a financial platform that allows the business to grow and stay financially stable.
These funds can be investments through the creation of stocks that clients purchase in order to increase the value of the business. Investment banking is a small portion of corporate finance, and while a company can have a corporate finance department without an investment banking department, in can't have investment banking without corporate finance.
Investment banking is used in order to grow the business and bring in the needed revenue to do this. Corporate finance is used to maintain every financial aspect of a business, from keeping it running to growing the business size. More information can about the differences between the two by reaching out to a friend or co-worker who has an online mba degree.
Do you know of any other differences between corporate finance and investment banking?
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