FIN 100 – Assignments and Rubrics © 2013 Strayer University. All Rights Reserved. This document...

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FIN 100 – Assignments and Rubrics © 2013 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.

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FIN 100 – Assignments and Rubrics © 2013 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. FIN 100 Student Version 1134 (1140 2-26-2013) Final Page 10 of 14 Assignment 2: Business Financing and the Capital Structure Due Week 8 and worth 240 points Businesses have to make many financial decisions that have a direct impact on operations and the ability to successfully compete in the marketplace. Base your writing on the information from the course coupled with information located in the Strayer databases or Internet. Write a three to four (3-4) page paper in which you: 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. 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. 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. 4. Explain the historical relationships between risk and return for common stocks versus corporate bonds. Explain how diversification helps in risk reduction in a portfolio. Support response with actual data and concepts learned in this course. 5. Use at least one (1) quality references. Note: Wikipedia and other Websites do not quality as academic resources. Your assignment must follow these formatting requirements: ? Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references...

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Robert · Accepted Answer

Financial Planning 
Financial planning is the most important tool for the success of any business, an 
organization without plan is like a ship without its captain. There are various tools that are being 
used in financial planning which helps organization in achieving great success. Various tools 
used by the management in the financial planning are financial ratios, cost of capital, capital 
budgeting techniques etc. 
Organizations use financial planning to determine the amount of money required to be 
invested in various assets. All the decision regarding the investment in assets comes under the 
category of capital budgeting, capital budgeting is the process in which the business determines 
whether projects such as building new plant or machinery or investing in a joint venture or 
purchasing an asset are worth pursuing. The decision for capital budgeting is directly affected by 
the cost of capital, risk involved, cash outflows, cash inflows etc. various risks are involved in 
capital budgeting such as determining the correct risk free rate of interest, determining the 
correct beta is a complex process, effect of leverage on the capital structure etc. 
Working capital management 
Working capital management is a part of financial management. Working capital can be 
defined as excess of current assets over current liabilities. Working Capital helps in determining 
liquidity in the operation of the business of all entities. Working Capital Management deals with 
issues such as managing current assets, current liabilities and their inter relation. 
In working capital management current assets and current liabilities are placed in a 
proficient manner in order to maintain short term liquidity. Following are the Objective of 
working capital management:- 
- Most important aim is to manage the firm’s current asset and current liabilities in 
order to ensure that short term obligations can be easily meet. 
- Working Capital Management interacts with the current assets and liabilities and 
arrives at the optimum level of both. 
- Ensure that short term liquidity and profitability is maintained. 
- In order to determine most appropriate financing mix.  
Cash management 
Once the working capital management policy is drafted policy for cash management must 
be drawn, cash management policy helps in determining the most optimum use of excess cash 
and source of finance in case of deficit. Investing excess cash is very important from point of 
view of the organization as idle cash do not generate any returns.

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