Michael Taillard

Corporate finance is the study of how groups of people work together as a single organization to provide something of value to society. It’s the job of those in corporate finance to manage the organization so that resources are efficiently utilized, the most valuable projects are pursued, the corporation can remain competitive, and everyone gets to keep their job.

In corporate finance, funds come in two types — hedge funds and mutual funds — and although they both have the same fundamental principles, each type has some unique traits, processes, regulations, and variations. The following table gives you a quick look at the main differences. Hedge Funds Mutual Funds Strategy Managers have more freedom in their use of investment tools and an ability to change strategy as they see fit.

People prefer to live their lives in a fantasy. They fear what they don’t understand and dream of what they (probably) can’t attain. You shouldn’t be surprised, then, to find out that this same view influences people’s financial decisions in a behavioral fluke described as the prospect theory, which basically says this: When making financial decisions that aren’t certain (meaning that the outcomes aren’t certain but the probability of success can be estimated), people look at the potential for gain or loss instead of relying on rational thinking using the probable outcomes.

The most significant trend in the manner in which financial transactions take place and the financial implications of this change comes from an overlap between financial engineering and computer engineering, called computational finance. Portfolio engineering and computerization have become very closely interconnected.

Securities firms provide transaction services related to financial investments, which are quite distinct from the services provided by traditional depository institutions. However, many commercial banks have separate departments that offer the services of securities firms, and others actually merge or partner with securities firms.

Everything that makes up a corporation and everything a corporation owns, including the building, equipment, office supplies, brand value, research, land, trademarks, and everything else, are considered assets. Believe it or not, when you start a corporation, that company’s assets aren’t just included in a Welcome Letter; you have to go out and acquire them.

Corporate finance plays a very interesting role in all societies. Finance is the study of relationships between people: how they distribute themselves and their resources, place value on things, and exchange that value among each other. Because that’s the case, finance (all finance) is really the science of decision-making.