Business Financing and the Capital Structure

Business Financing and the Capital Structure Essay example
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Finance & Accounting
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Business Financing and the Capital Structure 1. Explain the process of financial planning used to estimate asset investment requirements for a corporation. Explain the concept of working capital management. Identify and briefly describe several financial instruments that are used as marketable securities to park excess cash…

Introduction

Financial planning of the corporation would include building a plan to meet the expenses of the future through its holdings on assets after considering the predicted future cash flows and plans for withdrawal or allocation of funds. Financial planning help the corporations to understand the changes required in the areas of investment and allocation of assets in order to meet their financial goals. Thus financial planning ensures smooth transition of the financial position of the companies to attain the long term goals in future and also to meet the short term operational need. The process of financial planning is significant for the companies to attain sustainability in a competitive market (Baker and Powell, 2009). Working capital of corporations is the difference between the current assets and current liabilities of the corporation. Working capital management involves maintenance of optimum levels of both the current liabilities and current assets of the corporation. Optimum level of current asset and current liabilities indicate maintenance of sufficient current assets and cash in hand in order to meet the short term liability and expenses for daily operation in an efficient manner. The important ratios that are useful for effective working capital management are inventory turnover, account payables and accounts receivables. ...
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