{"id":6451,"date":"2021-09-19T11:41:08","date_gmt":"2021-09-19T06:11:08","guid":{"rendered":"https:\/\/scholarsclasses.com\/blog\/?p=6451"},"modified":"2025-10-07T20:01:03","modified_gmt":"2025-10-07T14:31:03","slug":"importance-of-corporate-finance","status":"publish","type":"post","link":"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/","title":{"rendered":"10 Importance of Corporate Finance &#8211; Scholarszilla"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large is-resized\"><img decoding=\"async\" width=\"1024\" height=\"576\" data-src=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Importance-of-Corporate-Finance-1024x576.jpg\" alt=\"Importance of Corporate Finance\" class=\"wp-image-6460 lazyload\" style=\"--smush-placeholder-width: 1024px; --smush-placeholder-aspect-ratio: 1024\/576;width:768px;height:432px\" title=\"\" data-srcset=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Importance-of-Corporate-Finance-1024x576.jpg 1024w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Importance-of-Corporate-Finance-300x169.jpg 300w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Importance-of-Corporate-Finance-768x432.jpg 768w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Importance-of-Corporate-Finance-1536x864.jpg 1536w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Importance-of-Corporate-Finance-640x360.jpg 640w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Importance-of-Corporate-Finance.jpg 1920w\" data-sizes=\"(max-width: 1024px) 100vw, 1024px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" \/><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d90c5979a86\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d90c5979a86\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#Importance_of_Corporate_Finance\" >Importance of Corporate Finance<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#Meaning_of_Corporate_Finance\" >Meaning of Corporate Finance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#Definition_of_Corporate_Finance\" >Definition of Corporate Finance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#Importance_of_Corporate_Finance-2\" >Importance of Corporate Finance<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#1_Helps_in_decision_making\" >1) Helps in decision making<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#2_Helps_in_raising_capital_for_a_project\" >2) Helps in raising capital for a project<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#3_Helps_in_Research_and_Development\" >3) Helps in Research and Development<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#4_Helps_in_smooth_running_of_business_firm\" >4) Helps in smooth running of business firm<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#5_Brings_co-ordination_between_various_activities\" >5) Brings co-ordination between various activities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#6_Promotes_expansion_and_diversification\" >6) Promotes expansion and diversification<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#7_Managing_Risk\" >7) Managing Risk<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#8_Replace_old_assets\" >8) Replace old assets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#9_Payment_of_dividend_and_interest\" >9) Payment of dividend and interest<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/scholarsclasses.com\/blog\/importance-of-corporate-finance\/#10_Payment_of_taxesfees\" >10) Payment of taxes\/fees<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading has-text-align-center\"><span class=\"ez-toc-section\" id=\"Importance_of_Corporate_Finance\"><\/span><strong>Importance of Corporate Finance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meaning_of_Corporate_Finance\"><\/span><strong>Meaning of Corporate Finance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><strong><a href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-corporate-finance\/\" target=\"_blank\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-corporate-finance\/\" rel=\"noreferrer noopener\">Corporate finance<\/a> deals with the raising and using of finance by a corporation. It deals with financing the activities of the corporation, capital structuring, and making investment decisions.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Definition_of_Corporate_Finance\"><\/span><strong>Definition of Corporate Finance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><strong><em>Henry Hoagland<\/em><\/strong> expresses the view that \u2018\u2018<strong><em>corporate finance deals primarily with the acquisition and use of capital by a business corporation.<\/em><\/strong>\u2019\u2019<\/p>\n\n\n\n<p>The term <a href=\"https:\/\/www.icaew.com\/technical\/corporate-finance\/corporate-finance-faculty\/what-is-corporate-finance\" data-type=\"link\" data-id=\"https:\/\/www.icaew.com\/technical\/corporate-finance\/corporate-finance-faculty\/what-is-corporate-finance\" target=\"_blank\" rel=\"noopener\">corporate finance<\/a> also includes financial planning, the study of capital market, money market, and share market. It also covers capital formation and foreign capital. Even financial organizations and banks play a vital role in corporate financing.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Importance_of_Corporate_Finance-2\"><\/span><strong><strong>Importance of Corporate Finance<\/strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Helps_in_decision_making\"><\/span><strong>1) Helps in decision making<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Most of the important decisions of business enterprises are determined on the basis of the availability of funds. It is difficult to perform any function of a business enterprise independently without finance. Every decision in the business is needed to be taken keeping in view of its impact on profitability. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Helps_in_raising_capital_for_a_project\"><\/span><strong>2) Helps in raising capital for a project<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Whenever a business firm wants to start a  new venture, it needs to raise capital. A business firm can raise funds by issuing shares,  debentures, bonds or even by taking loans from the banks.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Helps_in_Research_and_Development\"><\/span><strong>3) Helps in Research and Development<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>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 a lengthy process and therefore funds have to be made available throughout the research work. This would require continuous financial support.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/public-deposits-meaning\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/public-deposits-meaning\/\" target=\"_blank\" rel=\"noreferrer noopener\">Public Deposit <\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/gdr-meaning\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/gdr-meaning\/\" target=\"_blank\" rel=\"noreferrer noopener\">Global Depository Receipt (GDR)<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/features-of-shares\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/features-of-shares\/\" target=\"_blank\" rel=\"noreferrer noopener\">Features of Shares<\/a><\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_Helps_in_smooth_running_of_business_firm\"><\/span><strong>4) Helps in smooth running of business firm<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A smooth flow of corporate finance is needed so that salaries of employees are paid on time, loans are cleared on time, raw material is purchased whenever required, sales promotion of existing products is carried out smoothly and new products can be launched effectively.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5_Brings_co-ordination_between_various_activities\"><\/span><strong>5) Brings co-ordination between various activities<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Corporate finance plays a significant role in control and coordination of all activities in an organization. For e.g. Production will suffer if the finance department does not provide adequate finance for the purchase of raw materials and meeting other day-to-day financial requirements for smooth running of production unit. Due to this, sales will also suffer and consequently, the income of concern, as well as the rate of profit, will be affected. Thus the efficiency of every department depends upon effective financial management.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"6_Promotes_expansion_and_diversification\"><\/span><strong>6) Promotes expansion and diversification<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Modern machines and modern techniques are required for expansion and diversification. Corporate finance provides money to purchase modern machines and technologies. Therefore finance becomes mandatory for expansion and diversification of a company.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"7_Managing_Risk\"><\/span><strong>7) Managing Risk<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The company has to manage several risks, such as sudden fall in sales, loss due to natural calamity, loss due to strikes, etc. The company needs financial aid to manage such risks.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"8_Replace_old_assets\"><\/span><strong>8) Replace old assets<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Assets such as plants and machinery have become old and outdated over the years. They have to be replaced by new assets. Finance is required to purchase new assets.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"9_Payment_of_dividend_and_interest\"><\/span><strong>9) Payment of dividend and interest<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Finance is needed to pay dividends to shareholders, interest to creditors, banks, etc.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"10_Payment_of_taxesfees\"><\/span><strong>10) Payment of taxes\/fees<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The company has to pay taxes to the Government such as Income Tax, Goods and Service Tax (GST), and fees to the Registrar of Companies on various occasions. Finance is needed to pay these taxes and fees.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#46;&#46;&#46;<\/p>\n","protected":false},"author":1,"featured_media":6460,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[2518],"class_list":["post-6451","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-misc","tag-importance-of-corporate-finance"],"_links":{"self":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6451","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/comments?post=6451"}],"version-history":[{"count":5,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6451\/revisions"}],"predecessor-version":[{"id":39335,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6451\/revisions\/39335"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media\/6460"}],"wp:attachment":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media?parent=6451"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/categories?post=6451"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/tags?post=6451"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}