How Corporate Finance Rules Your Life

By Michael Taillard from Corporate Finance For Dummies

Unless you’re in a rare minority who live “off the grid” (secluded and self-sufficient), nearly every aspect of your life is strongly influenced, directly or otherwise, by corporate finances. The price and availability of the things you buy are decided using financial data. Chances are high that your job relies on decisions made using financial data.

Your savings and investments all rely quite heavily on financial information. Your house, car, where you live, and even the laws in your area are all determined using financial information about corporations.

From the very beginning, a corporation needs to decide how it will fund its start-up, the time when it first begins purchasing supplies to start operating. This single decision decides a significant amount about the corporation’s costs, which, in turn, decide a lot about the prices it will charge.

Where it sells its goods depends greatly on whether the corporation can sell its goods at a price high enough to generate a profit after the costs of production and distribution, assuming that competitors can’t drive down prices in that area.

The number of units that the corporation produces depends entirely on how productive its equipment is, and the corporation will only purchase more equipment if doing so doesn’t cost more than the corporation will be able to make in profits.

These factors affect your job, too; the corporation will hire more people who add value to the company only if it’s profitable to do so. Where your job is located will depend greatly on where in the world it’s cheapest to locate operations related to your line of work.

The decision to outsource your job to some other nation depends entirely on whether that role within the company can be done more cheaply elsewhere, without incurring risks that are too expensive. That’s right, even risk can be measured mathematically in financial terms.

You’re probably thinking to yourself, “But that’s only my work life. Surely corporate finance has no influence on my personal life.” Well, besides controlling how much you make, what you can afford, what your job is, and where you work, corporations have this habit of also financially assessing government policy.

When a proposed law (called a bill) is introduced, corporations determine what its financial impact will be on them. They also assess whether a law that exists (or doesn’t exist) has a financial impact on corporations. If the impact is greater than the cost of hiring a lobbyist in Washington, D.C., they’ll hire a lobbyist to pressure politicians into doing what they want.

This effort includes campaign contributions, marketing on behalf of the politician, and more. Going even as big as international relations between nations, a single large corporation can bring an entire global industry to a stop by convincing the right people that one nation is selling goods at a price lower than cost, which causes political conflict between nations.

This scenario has happened multiple times in the past, with the majority of claims being made by U.S. companies, and it can easily happen again.

Every aspect of your life is influenced in some way by the information derived from corporate finance. Money is a measure of value, and you are valuable, so nearly everything that makes you who you are can be measured in terms of money.

If it can be measured in terms of money, decisions will be made in terms of money. If you’re not the one making those decisions, you should probably be asking yourself who is.