Structuring Corporate Financial Policy: Diagnosis of Problems and Evaluation of Strategies

Successful diagnosis and prescription depend heavily on serious-minded creativity and careful judgment. Three basic stages in that butt:

1. Description : the ability to describe a steadys pecuniary policies is an necessary foundation of diagnosis and prescription

2. Diagnosis : benchmark perspectives, then one and only(a) compares the idealized and actual financial structures, looking for opportunities for improvement

3. Prescription : motion recommendations should spring from the insights gained in description and diagnosis

PART I : IDENTIFYING CORPORATE fiscal POLICY : THE ELEMENTS OF ITS DESIGN

The first task for financial advisors and decision makers is to control the firms current financial policy. Part I presents an approach for identifying the firms financial policy.

The Concept of Corporate Financial Policy

Financial policy is a numerate of managerial choice. Corporate financial policy is a stage of broad doorkeeperlines or a preferred style to guide the raising of not bad(p) and distribution of value.

Policies should be set to back the mission and strategy of the firm. Policies are products of managerial choice quite a than dictates of an economic model. Policies change over time.

The Elements of Financial Policy

1. Mix of classes of capital : mix may be analyzed through capitalizations ratios, debt-service insurance coverage ratios, and the firms sources-and-uses-of-funds statement

2.



Maturity structure of the firms capital : to describe the choices made nearly the maturity of outstanding securities is to be able to infer the judgements the firm made about its priorities. The standard measures of maturity are consideration to maturity, average life, and duration.

3. Basis of the firms coupon and dividend payments : basis addresses the firms preference for wintry or floating rates of payment and is a useful tool in fathoming managements judgment regarding the future course of busy rates

4. Currency : the global aspect of a firms financial...

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