Corporate finance revolves around the vital decisions companies make to optimize their capital structure, manage cash flows and drive long‑term value creation. At its core lies the balance between debt and equity financing: debt can be cheaper due to tax‑deductible interest, but excessive leverage amplifies insolvency risk, while equity avoids mandatory payments but dilutes ownership and may demand higher return expectations. Financial managers continuously assess the weighted average cost of capital (WACC) to ensure new investments generate returns above this hurdle rate.
Working capital management is equally critical, as it governs day‑to‑day liquidity. Efficient firms carefully juggle accounts receivable, inventory and payables cycles to free up cash without compromising customer satisfaction or supply reliability. By maintaining optimal cash buffers, negotiating supplier terms and accelerating collections, companies can reduce reliance on expensive short‑term borrowing. Overall, sound corporate finance practices align capital allocation with strategic goals, striking a dynamic equilibrium between growth ambitions and prudent risk controls.