23 August 2021
The roles, responsibilities and functions of investment banking and corporate financing are sometimes misunderstood. There is overlap between the two, but some key differences make each role unique.
A key difference is that corporate financing will deal with short and long term business goals while taking an overview of day-to-day financial operations. An investment banker, on the other hand, will focus on raising capital in public markets. An investment banker will also conduct mergers and acquisitions while handling private placements of equity and debt capital.
Let's take a look at each of these roles in more detail.
Corporate financing is a broad term that includes any business division that handles the financial activities of a company. It will usually prioritise maximising shareholder value through both long-term and short-term financial planning. It will do this through the implementation of a variety of different strategies. The activities that fall under the heading of corporate finance will range from capital investment to managing tax affairs.
Corporate finance will explore how to fund businesses to maximise their profits and minimise costs. It takes both an immediate, day-to-day overview of an organisation's cash flow and longer-term financing goals. As well as capital investments, corporate financing will concern itself with accounting, financial statements and taxation.
Arguably, the most important corporate financing task is making capital investment decisions. Getting it right, particularly when it comes to capital budgeting, will significantly impact a company's overall financial position. Finding sources of capital in the form of equity or debt is another key responsibility for corporate financing. This requires careful consideration as carrying too much debt can substantially increase default risk. Relying heavily on equity can also dilute earnings.
The short term aspects of corporate financing concern how a company manages its current assets and liabilities, working capital and cash flows.
Investment banking takes care of large, often complicated financial transactions. They can advise on the company's overall worth and the structure that's best employed if a client is considering a sale, acquisition or merger. It can also include issuing securities to raise money for client groups and preparing a company to go public.
Investment bankers may work at a high level within companies, governments and other large stakeholder groups, assisting in managing large projects. The aim throughout is to save their clients time and money, identifying and minimising risks before the client moves forward. They will tailor their advice to the prevailing economic conditions.
Some of the most critical differences between investment banking and corporate financing are to do with the focus of the financial organisation. While a corporate finance advisor will deal with day-to-day financial operations, handling short- and long-term business goals, an investment banker will primarily focus on raising capital.
Global Investment Strategy Ltd delivers a tailored corporate finance service for our growing list of international clients. We offer an industry-leading service within the context of a solid regulatory framework.
Our investment banking teams at Global Investment Strategy can provide corporate finance advisors and prime brokerage services. We ensure that every company we work with receives the best possible advice, alongside realistic investment opportunities to the debt and equity markets.Call +44 (0)20 7048 9400 or email email@example.com to find out more. Back to News