Tuesday, June 14, 2016

Corporate Finance vs. Entrepreneurial or Personal Finance

Corporate Finance vs. Entrepreneurial or Personal Finance
In this paper, a comparison of corporate finance with the entrepreneurial or personal finance has been made with a view to provide corporate finance assignment help. The corporate finance implies the management of financial resources of the large corporations by the financial manager. The entrepreneurial or personal finance implies the management of financial resources in a small organization. Essay writers on the finance assignment help has stated that the functions and concepts of financial management remain the same in the both the cases. The difference is only of the scale of operations, the corporations operate at large scale in comparison to proprietary enterprises. This difference in the scale of operations affects the assumptions of perfect market.      

Corporate Finance vs. Entrepreneurial or Personal Finance
The assumption of the perfect market states that the rate of borrowing for all the borrowers should be equal. This assumption of the perfect market holds true only in respect of the large corporations. Thus, the large corporations can reasonably assume that the borrowing rates charged by the bank for funds borrowed will be equal for all the borrowers falling within the same category. Further, the credit risk attached with the borrowings of the large corporations also tends to be lower. Due to lower credit risk, the lending and deposit rates of the quoted by the bank also tend to be same for the large corporations as asserted by the experts providing help with accounting homework.
However, the situation is different in regards to the small enterprises. Finance homework solution providers state that the small enterprises bear higher credit risk in comparison to the large corporations. The higher credit risk causes imperfections in the market. Due to the higher credit risk in case of small borrowers, the bank lending rates tend to be higher than the bank deposit rates. This implies that the bank provides loan at the higher interest rates and takes deposits from such small enterprise at lower rates. Further, the lending rates of the banks also differ from case to case basis depending upon the risk profile and financial standing of the enterprises.
Therefore, it is essential to note that the credit risk is an important factor in determining the interest rates to be charged by the bank on the credits extended. The large corporations are generally incorporated as the separate legal entities, thus, the risk of solvency remains lower. On the other hand, the proprietary enterprises run business in the individual capacity, which exposes it to the higher risk of solvency. Due to the higher risk of solvency, the default risk is also measured high, and therefore, the bank charges higher interest rates on the loans sanctioned to the small business.  

Based on the above discussion, it can be inferred that the assumption of a perfect market is reasonable for the large corporations, while it may be unreasonable for smaller enterprises. In other words, it can also be said that the difference in the interest rates due to the information mismatch does not arise in the case of large corporations. However, in the case of small enterprises, the difference in interest rates due to information mismatch could arise.  
The discussion in this paper revolves around the issue of market imperfections in case of corporate and entrepreneurial finance. The major difference between the corporate finance and entrepreneurial finance as identified in this paper is the scale of operations. The corporations operate at a larger scale than the proprietary enterprises as suggested by the experts providing financial management assignment help. Due to the lower default risk, the market imperfections do not apply in case of large corporations and thus, the interest rate is not affected by the information disagreement. The essay writing services UK are available on this issue for further clarifications.