Corporate Finance Tools

Who Calls the Shots? Investment Decision-making in Corporations

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Ever wondered who makes the decisions in the hundreds of businesses and companies we see all around us? You’re not alone. There’s a lot of complexity in understanding how businesses function and how they run.

Sometimes the owner or proprietor of a business isn’t the only person who’s responsible for making all the financial decisions of a business, especially for larger corporations and organizations. This is simply by virtue of the common practice of having multiple owners through equity funding. When there are so many stakeholders, it’s not as straightforward as a single person calling all the shots.

If it isn’t the owner, who is it then?

Depending on the organizational structure, there are different key persons and departments that oversee the in and outflow of funds, investments, inventory, managing liabilities and assets. These departments are known as Corporate Finance departments.

These departments oversee the various financial decisions within their firms and are comprised of experts who plan short and long term strategies that impact the firm’s day to day operations. They also strategize so managers can help increase the value of the company for shareholders. Another branch of corporate finance involves dealing with investment banks to raise funds for the company.

What about the CEO?

The CEO of a company will be responsible for major financial and corporate decisions that a company makes, from mergers and acquisitions to landing major clients, but for day to day expenses, they delegate tasks to managers and departments such as the one mentioned above.

The larger the organization, the likelier the delegation, unless of course, the CEO’s particular skill set is essential to the projects and decision making.

Do investors get a say?

Often, yes. Investors are more involved than your ordinary shareholder, which means they have a say in the operations of the company. This includes financial decision making as well.

To understand more about the way companies operate in the corporate world, you can contact me here.

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