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Business Financing and the Capital Structure
Finance & Accounting
Pages 5 (1255 words)
BUSINESS FINANCING AND THE CAPITAL STRUCTURE Financial Planning Every organization has specific goals and objectives that are derived from the organization’s mission and vision. The process of financial planning helps a business organization to determine how it would have enough money to achieve its strategic objectives.
The total cost of each resource has to be determined and summarized. On the basis of the summarized reports of cost of resources, a budget will be prepared by the finance and accounts department which would help the organization to determine next course of action (Summers, 2011, pp.2-11). Working Capital Management Proper working capital management is necessary to carry out day to day business operations. It is defined as the difference between current assets and liabilities. Thus, the objective of working capital management is to maintain a balance between current assets and liabilities. Positive difference or surplus funds can be used to make planned expenses such as payment of short term obligations and salaries. The working capital is negative or deficit when the current liabilities exceed current assets that would require the firms to borrow short term funds in order to manage the deficit (Ganesan, 2007, pp.1-2). When the working capital is positive, the firm would have surplus short term funds which can be invested in the money market instruments. The maturity of money market instruments are less than one year and hence investment in money market is less risky. ...
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