CORPORATE FINANCE

Corporate Finance

Corporate Finance

Introduction

Bristish Milling Limited is one of the largest milling company in Britain. Its major operations contribute in various projects assigned by the Government in different cities. Bristish Milling Limited is going to undertake Computer Numerical Control (CNC) machine. Computer Numerical Control (CNC) Milling is the most common form of CNC. CNC mills can perform the functions of drilling and often turning. CNC Mills are classified according to the number of axes that they possess. Axes are labeled as x and y for horizontal movement, and z for vertical movement, as shown in this view of a manual mill table. A standard manual light-duty mill (such as a Bridgeport™) is typically assumed to have four axes:

Table x.

Table y.

Table z.

Milling Head z

The number of axes of a milling machine is a common subject of casual "shop talk" and is often interpreted in varying ways. We present here what we have seen typically presented by manufacturers. A five-axis CNC milling machine has an extra axis in the form of a horizontal pivot for the milling head, as shown below. This allows extra flexibility for machining with the end mill at an angle with respect to the table. A six-axis CNC milling machine would have another horizontal pivot for the milling head, this time perpendicular to the fifth axis.

CNC milling machines are traditionally programmed using a set of commands known as G-codes. G-codes represent specific CNC functions in alphanumeric format.

Financial Leverage

The debt in relation to equity in a firm's capital structure-its Long-Term Debt (usually bonds), Preferred Stock and Shareholders' Equity -measured by the Debt-To-Equity Ratio. The more long-term debt there is, the greater the financial leverage. Shareholders benefit from financial leverage to the extent that return on the borrowed money exceeds the interest costs and the market value of their shares rises. For this reason, financial leverage is popularly called trading on the equity. Because leverage also means required interest and principal payments and thus ultimately the risk of default, how much leverage is desirable is largely a question of stability of earnings. As a rule of thumb, an industrial company with a debt to equity ratio of more than 30% is highly leveraged, exceptions being firms with dependable earnings and cash flow, such as electric utilities.

Since long-term debt interest is a fixed cost, financial leverage tends to take over where operating leverage leaves off, further magnifying the effects on earnings per share of changes in sales levels. In general, high operating leverage should accompany low financial leverage, and vice versa.

In the 1997 article, Buccino and McKinley define operating leverage as the impact of a change in revenue on profit or cash flow. It arises, they say, whenever a firm can increase its revenues without a proportionate increase in operating expenses. Cash allocated to increasing revenue, such as marketing and business development expenditures, are quickly. "Consumed by high fixed expenses."

In his 1997 article, Rushmore says that positive operating leverage occurs at the point at which revenue exceeds the total ...