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Business Financing and the Capital Structure - Essay Example
Author : myles17
Finance & Accounting
Pages 3 (753 words)
Business Financing and the Capital Structure Financial planning by corporations for estimation of asset investments Financial planning is a tool used by the corporations to meet the expenses of future with the help of its holdings on assets. Financial planning considers the predicted future cash flows, plans for withdrawal or allocation of funds and changes required in the areas of investment in assets to meet the financial goals…
Working capital is expressed as the difference between the short term assets and the short term liabilities. Inventory turnover, accounts payable, accounts receivables are considered for working capital management by companies. Financial instruments used as marketable securities to park excess cash The financial instruments used to park excess cash by corporations are bonds and debentures. These are marketable securities as it is possible to convert these securities into cash at any point of time due to large number of buyers available in the market. Raising business capital using both debt and equity options in today’s economy Raising business capital is a crucial aspect of decision making by the companies in today’s economy in the context of global economic slowdown. The options for raising business funds are debt financing and equity financing. A corporation may choose to adopt debt financing by acquiring loans from the market. In debt financing, the corporation would need to pay regular interests till repayment. However, the corporation has the opportunity to reduce interest payment by available tax shields. ...