Business Finance & Capital Structure

Business Finance & Capital Structure

Financial Planning To Estimate Asset Investment Requirements

Asset investment requirement is one of the most important areas of financial planning. For this area of high interest, the financial planning of businesses involves systematic and logical process for flourishing implementation. A number of steps are involved in the process of financial planning used to estimate asset investment requirement, including capital needs, budgeting, cash flow estimations, selecting right financial instruments, determining right asset allocation, and others.

First of all, the planning involves determination of capital that is required for investment while considering the limitations of budget. After this, the planning involves determination of right amount of capital needed for investment in different areas (assets), and moving onwards, it is essential to choose the financial instrument that is most accurate and beneficial for the investment (Kuhne, 2009). Hence, financial planning for asset investment requirement involves different steps that are essential for sound results.

Working Capital Management

Working capital management is one of the most significant areas of businesses and thereby holds an immense importance. WCM mainly deals with each of the current assets of an organization in a manner that it can leads towards maximizing company's value. Therefore, working capital management plays a fundamental role in effective business performance, as the shortage of finance or the uncontrolled over expansion of working capital may results in business failure or stunned business growth. The working capital management in large size firms can significant affects the business risk and reward as well as share price, whereas, in small sized companies it might be the factor behind business success and failure (Jain, 2004).

Financial Instruments Used As Marketable Securities to Park Excess Cash

A number of financial instruments are used as marketable securities for parking excess cash such as government treasury bonds, bonds issued by federal government, notes and bonds, or bonds issued by state or local agencies. In addition, financial instruments from banking institutions are also used, including repos, acceptance, or negotiable CDs. Furthermore, instruments from financial markets can also be used such as commercial papers, Euronotes, variable rate preferred shares, and money market mutual funds. Thus, there are varieties of financial instruments that can be used as marketable securities to park the excess funds; where, these instruments share the characteristics of comparatively low risk and high liquidity and marketability. Hence, companies such marketable securities are used by companies to park ...