Understanding the Basics of Corporate Finance - Arnold Hill

Are you a new business? Or perhaps you’re the owner of an established company and you’re keen to understand more about corporate finance.

If so, you’ll be pleased to learn we have recently established a growing corporate finance team here at Arnold Hill & Co LLP. With over 45 years’ experience across our team members, we offer a range of services to help you better navigate your day-to-day operations.

What is corporate finance?

It’s a fundamental area of finance that deals with how enterprises manage their financial resources, focusing on maximising shareholder value and involving various activities. These include:

• raising capital;
• investing in projects or start-ups;
• managing assets; and
• planning future financial strategies.

Corporate finance helps you make informed financial decisions that align with your company’s strategic goals. It’s made up of:

1. Capital budgeting – the process of planning and managing a company’s long-term investments.
2. Capital structure – the process of a firm financing its operations and growth by using different sources of funds; often debt, equity or a mix of the two. It considers funding that minimises costs and risks, whilst maximising value.

Why is a better understanding of corporate finance important for your business?

For any business, an understanding of Corporate Finance is essential for making informed decisions on topics including resource allocation, which is essential for business growth. Understanding which projects are most profitable allows enterprises to make the right investment decisions and ensure that capital is used effectively to drive growth.

A better knowledge of corporate finance also helps you when it comes to the topic of risk management; being able to identify potential risks associated with financial decisions and find ways to mitigate these is crucial. For start-ups, it’s more important still. After all, resources can be more limited, and inappropriate decisions can slow down growth.

Corporate finance is also vital for creating accurate financial projections, which allow businesses to plan for future expenses and growth. It also allows company owners to understand cash flow needs and ensure they have the necessary capital to continue operations.

How does corporate finance impact decision-making? 

1. Corporate finance significantly influences essential business decisions by helping businesses determine where they need to invest their capital to maximise returns. Such investment decisions are vital to ensure opportunities can be better evaluated, and businesses’ long-term strategic goals can be met with ease.
2. Corporate finance experts can analyse the cost of capital and the company’s financial health to help businesses make decisions relating to financing, too. This includes whether they should take on debt, or issue more equity when raising funds.
3. For profitable companies, understanding corporate finance can influence decisions on whether to reinvest profits back into the business or distribute them to shareholders as dividends. This balance is key to maintaining investor confidence and powering business growth.

Corporate finance is not just about managing money

“For new and high-growth companies, corporate finance is not just about managing money. It’s also about strategic decision-making, which will ultimately determine the scale of success of the business.” says Arnold Hill and Co’s Financial Analyst, Asha Moore (via our corporate finance team).

“By focusing on efficient resource allocation, risk management and strategic financial planning, businesses can build a strong foundation for sustainable growth and profitability.” she continues.

How can we help?

Whether you’re just starting out or you’re looking to learn more about corporate finance, partner with Arnold Hill’s corporate finance team. We’ll ensure your business receives tailored, strategic financial advice and guidance to help your business thrive in today’s competitive markets.

For more details, get in touch with Asha today at info@arnoldhill.co.uk.