o Financial planning is the financial discipline which helps countries, companies (corporations) and persons (individuals) define their short, mid and long term financial strategies in order to achieve their financial targets. o Financial planning covers amongst others, risk management, asset allocation, tax planning just to name a few (other topics: retirement and estate planning) o in simple words, Financial planning helps determine the capital requirements for certain investments • Example: Why financial planning for a corporation: o A company needs to assess its financial capabilities continuously in order to invest in new products, hire new people, buy new assets, acquire other companies or buy new technologies to keep …show more content…
a company has more debt than equity, the risk involved for the equity holder is bigger. They own equity in a company which has high debts: this is risky. So then, they expect higher return on equity (RoE). o Capital structure theories: Modigliani and Miller theories • The theory (or main theorem) of Mr. Modigliani and Mr. Miller compares the value of two companies which are identical, but have different financial structure. The comparison is taking place in a “perfect capital market” (see definition of perfect capital market below) • We take the example of 2 companies: Company A is financed by equity only (unlevered, see above). Company B is levered i.e. financed by both debt and equity. • The theorem states that: o Both companies A and B have the same value. I.e. an investor, who wants to buy/acquire the company A by spending an amount of money (M), can buy also the company B for the same amount M. o The capital structure of a company does not affect the value of a …show more content…
There is much information which needs to be analyzed, by both parties. In ideal world, the parties involved in this transaction, have the same knowledge i.e. the same information. However, in real world, always one party will have more information than the other (e.g. the seller knows more than the buyer). In this case, we talk about asymmetric information. This could be harmful for one party, if the other is hiding information about a project (e.g. expected revenues) or a product (features, technology, etc) and taking advantage of the transaction. Nowadays, many experts are involved in transactions and tend to have access to all types of information, which lower the risk of asymmetric
Debt - Equity ratio was included to show that both companies are financed with a large portion of debt, yet remain
In this case, we can say that Amazon performance is a lot better than CanGo. A high Debt to Equity Ratio generally means that a company has been aggressive in financing its growth with debt. Debt can come in the form of stocks, bonds, and loans that the company borrowed against. Amazon current ratio is 1.31, but CanGo current ratio is 5.33. In general we can see that CanGo is performing better in this area compared with their main competitor Amazon, because this ratio shows that CanGo is capable of repaying its debts and liabilities than
The debt to ratio is a ratio that compares a firms total liabilities and shareholders’ equity. It shows the proportion of the amount of money invested by the business owners as well as external entities. Debt to Equity Ratio = Total Liabilities/Shareholders’ Equity = $80,994/$931,490
I chose to analyze Kroger’s for my discussion as I felt quiet interesting when doing research about the performance of today’s grocery industry. Founded in 1883 as a small grocery store and has grown to become the largest supermarket operator in the US. It operates more than 2,600 supermarket stores, 782 convenience stores, and 326 fine jewelry stores. It flourished by itself by diversified products in its stores in all directions.
Sally’s Beauty Holding, Inc., who has a current ratio of 2.4, is quicker to turn their current asset into cash but also is not investing excess assets. Both companies are able to meet their debt obligations. On the other hand, Coty’s Inc. current liabilities exceeds their current assets revealing their current ratio to be .94. Having a ratio below one can imply that current assets are barely being covered by the current liabilities. Ulta Beauty’s debt-to-equity is estimated to be .65, which reveals Ulta Beauty to have a low risk and not using high amounts of debt to finance operations, because total liabilities is $1,001,660 and total shareholders’ equity is $1,550,218.
The Great Depression was a difficult time in American history. Many families and businesses suffered due to the stock market crash. Despite the stock market crash being a contributor to the Great Depression, the Depression did not happen because of it. There were causes that led up to the crash such as the get rich quick mentality, the Smoot Hawley Tariff, and the bank failures that led to the stock market crash and contributed to the Great Depression. Wall Street was seen as a “money trust” and “a place where insiders fleeced small investors” (Give Me Liberty, Eric Foner, pg 786).
When the company buy it, then only the amount of asset and liability are recorded. So, the CEO of Hill Country can keep his company’s leverage ratio and debt-to-equity ratios at lower rate. It can avoid that the leverage ratio and riskiness of the company will weaken the strength of balance sheet and periodic
Abstract The strategic change cycle is one of the processes within strategic planning. This cycle is a ten-step process created to assist organizations in meeting their mandates, satisfying their missions, and constructing public value. “Strategic planning is intended to enhance an organization’s ability to think, act, and learn strategically” (Bryson & Alston, 2011). Introduction Strategic planning is “a deliberate, disciplined effort to produce fundamental decisions and actions that shape and guide what an organization (or other Entity) is, what it does, and why it does it” (Bryson & Alston, 2011).
The changing regulations and the market operations will impact highly the financial planning, Investment, taxation and superannuation. The future skills which would be critically required by the financial services organizations would be: • Supervision and
Introduction The main objective of this particular case study is to assist Victor Dubinski, the current CEO of Blaine Kitchenware, decide whether or not repurchasing shares and changing the firm’s capital structure in favor of more debt could actually be benefit the company and its shareholders. Blaine Kitchenware is a small cap, public company who focuses on selling various different residential kitchen appliances. Up until this point, the company has only used cash and equity financing to acquire independent kitchen appliance manufacturers, and expand into foreign markets abroad. Given their excess cash and lack of debt, Blaine Kitchenware is considered to be “over-liquid and under-leveraged” (Luehrman & Heilprin, 2009).
It can thus be seen as “a process by which managers discover where they are, where they want to go, how they believe they might get there, if they are getting there, and, as they proceed, if they still want to get there”. To do this efficiently and effectively, planning must take into account both the company’s complexity and its relevant environment. It does so in many ways, which include forming different levels of planning. Effectiveness of anticipation: The starting point for strategic planning is anticipating an action.
However, Nike seems to be doing the opposite, which is giving a high ratio. Debt per Equity Ratio = Total Debt/Total Equity The debt per equity ratio shows to what extent a company’s assets are either financed by debt or equity. A high ratio indicates aggressiveness on behalf of the company to finance its growth through debt.
Self -Reflection on Module 8.2a Financial Management Before the commencement of the sub-module 8.2, we were supposed to choice either 8.2a (Financial Management) or 8.2b (Investing Social Security Reserves), because the sub-module is divided into two. I have decided to take the sub-module 8.2a, and during online VC sessions, I have had gained some basic knowledge from this subject (Financial Management). For me, this is the first time I had chance to learn about the subject, before that I have just heard some information about financial management only from a friend who studied Accounting and working as Auditor at Association of Chartered Certified Accountants (ACCA) consultancy in Ethiopia. From the beginning I am so much eager and impressed
REFLECTION PAPER IN INVESTMENTS AND INVESTMENT PORTFOLIO As they say, "Money isn't everything, but happiness alone can't keep out the rain. " It is often said that money is not the most important thing in the world. Despite of this, we still need to understand the true value of money. Money, in and of itself, is not very spectacular.
Financial management “is the operational and financing activity of a business that is responsible for obtaining and utilizing the funds necessary for effective operations. Thus, Financial Management is concerned with the effective funds management in the business process. Finance is interrelated functions which deals with marketing function, production function, Human Recourse function and Research & development activities of the business concern. Financial Management is concerned with the financing, acquisition and management of assets with some overall goal in minds. There are three major areas in Financial Management decision making.