StudentShare solutions
Triangle menu

2: Business Financing and the Capital Structure - Assignment Example

Free

Extract of sample
2: Business Financing and the Capital Structure

With this information, the payback period may be estimated for a rough expectation of when the investment would break even. Other methods will necessitate the estimation of the cost of money which would serve as the discount rate for time-value-of-money estimations. On the basis of this discount rate, the present values of cash inflows and cash outflows should be calculated and offset to determine the net present value, or the ratios thereof taken for the profitability index. Finally, the internal rate of return can be acquired through the hit-and-miss estimation method. Working capital management is based on maintaining appropriate levels of current assets and current liabilities, in such a way as to provide for the timely fulfillment of short-term debt obligations and operating expenses without holding excessive amounts of liquidity that otherwise could be invested. Excess cash may be invested in short term financial instruments (marketable securities) could include short-term debt instruments such as treasury bills and commercial papers, deposits and certificates of deposit, commercial papers, short-term interest rate futures and forward rate agreements. Of these, treasury bills are considered the safest because they are government securities and hold minimal risk. Commercial papers are debt instruments made in favour of private corporations and carry as much risk as the corporation’s ability to repay the debt. Deposits and certificates of deposit are entered with the bank for conversion

Related Essays

LASA 2: Airvalue Airways Strategic Planning
Capital budgeting consists of two words – “capital” and “budget”. Capital in the context of capital budgeting is fixed asset used in production and service. In this case, fixed asset is one of the aircrafts; European made A220, and American made G435.
6 pages (1500 words) Assignment
Business Financing and the Capital Structure
Alternatively, the financial planning helps corporations to estimate asset investment requirements in order to achieve long term objectives. Financial planning activity starts from the analysis of business environment and feasibility of business model. Then it identifies the sources needed to achieve these objectives in monetary units by quantifying scarce resources such as raw materials for production process, labor, necessary equipments, inventory, and so on.
5 pages (1250 words) Assignment
Assignment 2 - Business Scenario
Apple is a worldwide company with a moral responsibility that enables equal treatment to all employees. The company is conversant with the principles of UN Global compact as we are Member Company. As our corporation boasts of increase in market size, apple has attracted different Local Networks that assess the ways of enabling strict compliance to the Global compact ethics.
4 pages (1000 words) Assignment
Capital Structure of Company Accor
To maximize the owners (shareholders) wealth. The financial manager should attempt to achieve an optimal capital structure i.e. an ideal combination of various sources of long term funds so as to minimize the overall cost of capital and maximize the market value per share.
5 pages (1250 words) Assignment
Capital Structure Assignment
The Modigliani-Miller theory may be intuitive, but is it credible Are capital markets really sufficiently perfect After all, the values of pizzas do depend on how they are sliced. Consumers are willing to pay more for the several slices than for the equivalent whole.
10 pages (2500 words) Assignment
LASA 2: Airvalue Airways Strategic Planning
In this case, fixed asset is one of the aircrafts; European made A220, and American made G435. Budget in the context of capital budgeting is the plan that describes in detail inflows and outflows of revenue and expenses during the project life. The project life for
6 pages (1500 words) Assignment
Capital Projects Recommendation 2
ll consider the following factors before planning and recommendation; initial investment, operating cash flow (OCF), terminal cash flow, cost of capital, opportunity cost, and break-even point. Initial investment includes; cash outlay, working capital, salvage value and tax
1 pages (250 words) Assignment
Discussion Question 2 Week 8 Capital Structure Decisions
Equity involves the issue of preferred stock, common stock or using the company’s retained earnings. When talking about the capital structure of a company, this means the debt to equity ratio. This is important because it can be able to show
1 pages (250 words) Assignment
Business Financing and the Capital SStructure
Debt is the borrowing of money by the company using the various debt instruments and then repaying the money plus an interest. Equity is the selling of the company’s interests in a bid to raise money. Debt has several advantages over equity. First, in debt financing the
2 pages (500 words) Assignment
Business financing and the capital structure
Companies have various alternatives for raising capital. The sources are broadly categorized into two (Long-term and short-term sources). The source chosen depends on the
2 pages (500 words) Assignment
to loans, and hold as much risk as is associated with the bank’s record of performance. Interest rate future and forward rate agreements are considered speculative and would normally not be viable considerations because of their high risk. 2.Assume that you are financial advisor to a business. Describe the advice that you would give to the client for raising business capital using both debt and equity options in today’s economy. Raising business capital should take into consideration the nature of the business, its production cycle, its initial capital outlay and the expected time within which it is expected to produce income, and the risk the investors are willing to take. Business capital can be raised either as equity or as debt. The capital structure of the firm should be estimated – that is, how much of their own funds the business owners can raise for themselves (equity) against what they wish to raise as borrowed funds (debt). The higher the leverage or the ratio of debt to equity, the greater the risk of default the business is exposed to. The business is also committed to earn within a shorter period of time because of the need to pay periodic interest on the loan. On the other hand, relying too much on equity will be a greater burden to investors, for which they may seek to expand the shareholder base. Increasing the number of shareholders, however, dilutes the value of the shares and reduces the control of the current shareholders over the business. The risk-return trade-off should be carefully considered by the business owners before they raise the capital for their business. 3.Explain why a business may decide to seek capital from a foreign investor indicating the risk and rewards for such a decision. Provide support for rationale. A business may seek

Summary

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…
Author : stephon86
Assignment 2: Business Financing and the Capital Structure essay example
Read Text Preview
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation