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The financial services industry encompasses the investment and banking industries as subsets, and are defined as businesses whose primary business activity is money management.

While part of the same system, corporate finance professionals deal in the day-to-day financial operations, while investment bankers raise capital in the public markets. Companies are managed through corporate finance and grown through investment banking.

Business operations require huge capital, which has to be obtained and used effectively to maintain the other business functions. In order for the business to sustain itself, capital investments have to see a return. Cash inflow and outflow need to balance for the successful operations of a business, and there are a lot of elements to be considered. There are times when outflow is profitable, just as inflow can incur a cost.

Investment and finance activities are the most prominent elements of cash inflow and outflow. Both contribute to the success of a business, but there are differences when it comes to profitability.

Investment banking refers to the activities of a financial services company that provides advice on financial transactions for individuals, corporations, and governments. Investment banking is different from commercial banking services, which is what most people think of as banking. Commercial banking is the client-focused side of the banking industry, which includes taking deposits from consumers and businesses and loaning money to customers. Investment banks provide services to businesses, governments, and individuals related to complex financial transactions.

Common investment banking activities are those having to do with mergers and acquisitions, and corporate financing. When it comes to mergers and acquisitions, investment bankers can provide valuation calculations, assist in negotiations, and present opinions on transactions.

Through corporate financing, businesses can take on debt or they can issue equity, either in the form of an initial public offering or a secondary offering and investment bankers can facilitate this process, as well. When a company makes a decision to go public through an initial public offering, an investment banker may act as an intermediary between the company and investors in order to sell its initial set of shares. This process is known as underwriting. The investment banker determines the initial offering price, ensures that the IPO is compliant with regulatory requirements, and purchases the shares from the company for later sale to the public.

Investment banks may also buy and sell derivatives for clients, as well as for the firm's own accounts. Many investment banks conduct investment research for clients, and will advise corporations and individuals on how to invest their capital, even managing client accounts.

Investment banks in the United States are regulated by the Securities and Exchange Commission, which oversees the securities industry.

Corporate finance deals with the sources of funding, the capital structure of corporations, the actions that managers take to increase the value of the firm to shareholders, and the tools and analysis used to allocate resources. The goal is to maximize or increase shareholder value. Corporate finance involves capital budgeting and the management of working capital. Capital budgeting involves the criteria for which value-adding projects should receive investment funding, and whether to finance the investment with equity or debt capital, while the administration of the corporation's monetary funds that deal with the short-term operating balance of current assets and liabilities is working capital management.

A financial plan is the evaluation of an individual's current salary and future financial state through known variables that can be used to predict future income, asset values, and withdrawal plans. Generally, this is a spending plan based on income and expenses.


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