Financial Management
Liberty University Online BUSI530-B15 Managerial Finance June 10, 2014
Introduction
A company that is barely making it must put itself into a position to where they can best take advantage of the opportunities that lie ahead. This case involves a company that is two years away from achieving financial solvency and put it on the path to creating value for its shareholders. The current problem is how to sustain this company over the next two years without them going under and not being able to put their product on the market in two years.
Proposal for Obtaining Funds According to Brealey, Myers and Marcus, corporations have three broad sources of cash, they can internally generate funds in which they reinvest their cash back into the firm or they can raise money from external sources by issuing shares or debt (Brealey, Myers, & Marcus, 2009, p. 400). The company whose capital structure is in a financial deficit doesn’t have the option of reinvesting back into the company as their cash flow is minimal they must seek other alternatives such as issuing common or preferred shares or to borrow money from either banks or seek private equity investment opportunities.
Debt Capital Most companies consider borrowing money through banks or selling their shares to the public in order to keep their business operations going or maybe to fund their future investments. There are several forms of debt such as bank loans or bonds issued to the public Debt comes in several forms, such as through bank loans, notes payable, or bonds issued to the public. Short-term debt is called “Commercial Paper” which is an unsecured promissory note with a fixed maturity of no-more than 270 days and is not usually backed by nay form of collateral. This may work in the short term to help the company develop other alternatives or form of combination.
Equity Capital Companies have the option of selling their company shares to investors in
Introduction
A company that is barely making it must put itself into a position to where they can best take advantage of the opportunities that lie ahead. This case involves a company that is two years away from achieving financial solvency and put it on the path to creating value for its shareholders. The current problem is how to sustain this company over the next two years without them going under and not being able to put their product on the market in two years.
Proposal for Obtaining Funds According to Brealey, Myers and Marcus, corporations have three broad sources of cash, they can internally generate funds in which they reinvest their cash back into the firm or they can raise money from external sources by issuing shares or debt (Brealey, Myers, & Marcus, 2009, p. 400). The company whose capital structure is in a financial deficit doesn’t have the option of reinvesting back into the company as their cash flow is minimal they must seek other alternatives such as issuing common or preferred shares or to borrow money from either banks or seek private equity investment opportunities.
Debt Capital Most companies consider borrowing money through banks or selling their shares to the public in order to keep their business operations going or maybe to fund their future investments. There are several forms of debt such as bank loans or bonds issued to the public Debt comes in several forms, such as through bank loans, notes payable, or bonds issued to the public. Short-term debt is called “Commercial Paper” which is an unsecured promissory note with a fixed maturity of no-more than 270 days and is not usually backed by nay form of collateral. This may work in the short term to help the company develop other alternatives or form of combination.
Equity Capital Companies have the option of selling their company shares to investors in
References: Brealey, R. A., Myers, S. C., & Marcus, A. J. (2004). Fundamentals of corporate finance (7th ed.). Boston, Mass.: McGraw-Hill Irwin. Critchley, B. (2009, Sep 24). How to raise cheap capital. National Post (Index-Only) Retrieved from http://search.proquest.com/docview/355056521?accountid=12085 Hodson, P. (2014, Mar 15). Five signs of a good financing. National Post Retrieved from http://search.proquest.com/docview/1507764387?accountid=12085 Hofmann,Donald J.,,Jr. (1993). How to raise capital, privately. Financial Executive, 9(3), 30. Retrieved from http://search.proquest.com/docview/208888665?accountid=12085