The Role of Financial Managers

            Corporate finance can be defined as the science of managing money in a business environment. Another accurate definition is corporate finance involves six basic related functions: financing, capitol budgeting, a capital structure decision, financial management, corporate governance function, and risk- management. .
             Corporations raise capital by selling debt which are bonds and notes, and equity which is stock claims against themselves - either directly to investors or indirectly to financial intermediaries, such as commercial banks. Financial managers distribute these funds to the most attractive investment opportunities. The same finance professionals also manage the firm's cash flows to ensure financial solvency and to minimize the resources needed to support a given level of corporate activity. Finally, financial managers must monitor and control all aspects of the firms risk in order to maintain a balance of risk and return that is consistent with share-price maximization. .
             Businesses raise money to support investment and other activities in one of two ways, either externally from investors or creditors, or internally by retention and reinvestment of operating profits. .
             Sole proprietorship and partnerships face very limited external funding opportunities, but the choices for corporations are much richer. They can raise capital either by selling an ownership interest which is equity, usually in the form of common or preferred stock, or by borrowing money (debt) from one or more creditors. When corporations are small and young, they usually must raise equity capital privately, either from acquaintances or from professional investors such as venture capitalists, who specialize in high-risk/high-return investments in rapidly growing entrepreneurial businesses. After a corporation goes public by conducting an initial public offering (IPO) of stock, it has the option of raising cash by selling additional stock in the future.