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Business Financing and the Capital Structure
Finance & Accounting
Pages 3 (753 words)
1) a) Financial planning is a process that every firm must undertake before starting any new project or expansion project. The process of financial planning starts with formulating pro-forma sales forecast for the next few years (Besley, Brigham, 2000). Based on your sales estimates the company will determine how much and which specific assets the firm will need to meet those sales objectives.
Afterwards the pro-forma financial statements and ratios are estimated management will want to know how realistic those results are, which steps are necessary to attain expected results and what impact changes in projected operations would have on our estimates. At this stage the firm will enter into the financial control phase in which firms will be concerned with implementing steps needed to meet those financial plans as well as adjusting the process to meet your objectives and dealing with feedback in order to ensure that the firm's overall goals are achieved. b) The concept of working capital management involves the process of short-term financial management of current assets and liabilities in order to achieve the companies’ objectives at the lowest costs possible to the company and maximize profitability based on internal financing policy. Some of the short term marketable securities used by firms to invest excess cash on hand which are near-cash equivalents are: U.S. Treasury Bills - Considered nearly risk-free investments instruments issued by the U.S. ...
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