What Is Corporate Finance? Definition, Types and Examples

Corporate finance is at the heart of every business decision that involves money, resources and growth.¹ Its core objectives are to control costs, manage financial risk and maximize profitability while creating long-term value for shareholders.¹

Professionals who work in corporate finance have a strong impact on day-to-day operations and business strategies. From determining which projects receive funding, to guiding investments in technology, to making critical decisions about hiring and workforce needs, corporate finance plays a decisive role in a company’s success.

In this article, we’ll explore why corporate finance matters, the principles that guide it and the key areas of focus that define this dynamic field.

Why Corporate Finance Is Important for Business Growth

Corporate finance is important for business growth because it’s the mechanism through which companies acquire the tools and means to expand. This includes the following:

• Investing in new forms of technology, such as a fleet of upgraded trucks or cutting-edge point-of-sale software
• Hiring new workers in strategic areas that will lead to growth, such as expanding a sales team or increasing the number of tech support staff
• Buying intellectual property that can be used to expand a product line
• Acquiring new businesses through mergers and acquisitions

A strong corporate finance team will analyze market conditions and find new opportunities for expansion and effective capital allocation. It will also take account of the potential risks and find ways to hedge the company’s bets, minimizing the impact of a bad investment.

Objectives of Corporate Finance Across Business Stages

Corporate finance priorities evolve as companies grow and mature. In the early stages, younger businesses are often focused on attracting capital from private or angel investors. Preserving limited resources, securing loans and building proofs of concept to inspire investor confidence become critical for businesses in the early stages of growth.

As companies grow, the focus shifts from survival and aggressive fundraising to long-term stability and strategic expansion. Instead of prioritizing short-term capital preservation, businesses begin concentrating on more advanced objectives such as diversifying revenue streams, managing debt obligations, stabilizing cash flow and optimizing working capital. At this stage, companies may choose to sell shares on the public market to raise capital for large-scale expansion and improvements.

For well-established enterprises, corporate finance often emphasizes strengthening shareholder value. Mature companies may distribute excess cash through dividends or initiate stock buyback programs to boost share prices.

Types of Corporate Financial Management

There are two primary types of corporate finance.

Equity Financing

Equity financing means raising money by selling pieces of your company through common or preferred stock.² The main benefit is that you don’t have to make regular debt payments, and you have more flexibility during tough times. But equity financing means giving up some ownership and control of your company.

Debt Financing

Debt financing lets companies raise money by taking on loans from banks, other financial institutions or the public through bond sales. The main benefit of debt financing is that companies retain full ownership and receive tax breaks on their interest payments.³

Both equity and debt financing can make sense. The appropriate choice will depend on your company’s current financial setup, market conditions and growth stage. Companies with strong credit and steady cash flows often choose debt financing, while fast-growing companies rely more on equity financing.

What Are the Three Main Areas of Corporate Finance?

Corporate finance includes three significant areas of focus.

Capital Budgeting

Capital budgeting is the most important area of corporate finance. It helps you evaluate long-term investment opportunities that will grow your company.⁴ You’ll study potential projects using tools like net present value (NPV) and internal rate of return (IRR) to figure out which investments will create the most value for shareholders.

Working Capital Management 

Working capital management focuses on managing short-term assets and debts to keep operations running smoothly and to maintain a reliable cash flow. You’ll watch accounts receivable, inventory levels and accounts payable to make sure you have enough money for your daily operations.

Investment Evaluation

Investment evaluation includes both financial and strategic analyses of acquisitions, partnerships and major expenditures. You’ll use a cash flow analysis and strategic fit assessment to determine whether certain investments match your company’s strategy.

What Is an Example of Corporate Finance in Action?

Apple serves as a great example of how large corporations use corporate finance principles to achieve their strategic goals. In 2023, Apple borrowed billions of dollars at lower interest rates, despite already having large cash reserves. It used this borrowed money to buy back its own shares, returning value to its shareholders while keeping a reserve of cash available for future investments.⁵

Apple showed how smart corporate finance works in practice by using low interest rates to borrow money for less while maintaining its flexibility.

Careers and Education in Corporate Finance

Popular careers in corporate finance offer strong compensation and professional development opportunities. Financial analysts earn an average salary of $86,000 to $134,000 per year.⁶ This job primarily entails creating financial models and identifying investment opportunities. Corporate development managers earn an average of $61,000 to $201,000 per year leading merger and acquisition activities.⁷

Investment banking professionals make between $40,000 and $164,000 per year helping companies raise money and merge with other companies.⁸

To attain one of these positions, you’ll typically need a bachelor’s degree in finance, economics or business. Important skills include the ability to build and interpret financial models. You’ll also want advanced Excel skills.

Power Your Finance Career With an Online Graduate Program

Corporate finance helps shape the future of organizations. A career in this field positions you at the center of decision-making, offering opportunities to rise into leadership roles and make a meaningful impact.

William & Mary’s Online Master of Science in Finance (MSF) program is designed to give you the tools and confidence to excel in this competitive field. Through rigorous coursework in financial modeling, analysis and strategic decision-making, you’ll gain both the technical expertise and the leadership skills that top employers seek. Our program is tailored for working professionals who need flexibility without sacrificing academic excellence. You’ll learn from faculty who bring both deep academic knowledge and real-world corporate finance experience, ensuring that what you study is directly applicable to today’s business landscape.

Contact an admissions outreach advisor today to learn how William & Mary’s online master’s degree can transform your career prospects in corporate finance.