Role of the US Financial System Paper
Corporations need to raise short-term and long-term capital to make their company survive. The primary goal of corporate finance is to enhance corporate value while reducing the firm's financial risks. Capital investment decisions are long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders. On the other hand, the short term decisions can be grouped under the heading of working capital management. A couple of ways a corporation can raise money for short term and long term capital are, contacting investment bankers to advise them on high level issues of financial organization, recommend and execute strategies for taking over and merging with other companies, and handle selling a company's stock to the public. Another way to raise capital is to apply for grants. Corporations have the option of going through a couple different places, private sector, corporations, and foundations. In an increasingly competitive business world, equity investors and lenders are both attracted, more than ever before, to predictable future profits. One obvious way for business owners to demonstrate a high probability of the occurrence of such profits is to structure their customer relationships in such a way as to lean more towards recurring revenues than a "one time" sale. Creative investment bankers can then find ways to optimize balance sheets using the recurring revenue stream as a form of "virtual collateral" in order to reduce overall cost of capital. For investment bankers, it is important to challenge clients to think in a very radical way about their businesses before approaching the capital markets. The ability to adjust the business model to create a higher percentage of recurring revenue is one of the first things that should be examined. Then the results of analysis can be directly applied...
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