Corporate finance deals with the sources of funding and the capital structure of corporations and the actions that managers take to increase the value of the company to the shareholders, as well as the tools and analysis used to allocate financial resources. Although it is in principle different from managerial finance which studies the financial management of all companys, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of companys.

Capital, in the financial sense, is the money that gives the business the power to buy goods to be used in the production of other goods or the offering of a service. (The capital has two types of resources, Equity and Debt).

The deployment of capital is decided by the budget. This may include the objective of business, targets set, and results in financial terms e.g. the target set for sale, resulting cost, growth, required investment to achieve the planned sales, and financing source for the investment.

A budget may be long term or short term. Long term budgets have a time horizon of 5-10 years giving a vision to the company; short term is an annual budget which is drawn to control and operate in that particular year. Budgets will include proposed fixed asset requirements and how these expenditures will be financed. Capital budgets are often adjusted annually (done every year) and should be part of a longer-term Capital Improvements Plan. A cash budget is also required. The working capital requirements of a business are monitored at all times to ensure that there are sufficient funds available to meet short-term expenses. The cash budget is basically a detailed plan that shows all expected sources and uses of cash when it comes to spending it appropriately. The cash budget has the following six main sections:.

• 1. Beginning Cash Balance - contains the last period's closing cash balance, in other words, the remaining cash from last years earnings.
• 2. Cash collections - includes all expected cash receipts (all sources of cash for the period considered, mainly sales).
• 3. Cash disbursements - lists all planned cash outflows for the period such as dividend, excluding interest payments on short-term loans, which appear in the financing section.
• 4. Cash excess or deficiency - a function of the cash needs and cash available. Cash needs are determined by the total cash disbursements plus the minimum cash balance required by company policy. If total cash available is less than cash needs, a deficiency exists.
• 5. Financing - discloses the planned borrowings and repayments of those planned borrowings, including interest.

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