Financial Management

Financial Management

Introduction

Capital structure plays an important role in the organization and it is needed to be managed effectively in order to maximize the wealth of business organization. A corporation's financial policy defines the company's overall approach to managing its financial decisions. A company's financial strategy is comprised of the following: Capital budgeting, financing and dividend policy. While every corporation typically deals with these three areas when setting its financial policies, each organization must examine many factors that are unique to its business and situation before setting up its overall policies. Trends in setting corporate financial policies have been changing over the past decade. While investors and shareholders want to insure that there is capital available to grow the business, shareholders are increasingly comfortable in accumulating debt to do so. In today's fast changing marketplace, corporate managers and investors are looking for short-term gains as opposed to more traditional long-term financial strategies.

In this paper, we are going to discuss, and evaluate the importance of capital structure and how it helps to manage the wealth of organization effectively. In addition to this we'll also be discussing the problems of agency and how financial management manages these problems.

Part A.

Critically evaluate the need to manage capital structure effectively in maximising the wealth of business organisations.

Capital structure has many components which are to be analyzed before making a policy of the business organization. Capital structuring is very critical part of the business organization and it has to be managed sensitively in order to maintain the financial fitness of the organization. The financial fitness of an organization is typically assessed from looking at its balance sheet; the ways that companies are willing to manipulate or dirty their balance sheets is discussed. Investors are keen to see a return on their equity investment in the form of dividends (also known as shareholder or investor value). Investors and shareholders have become increasingly active in determining corporate fiscal policy with an eye toward short-term financial rewards for themselves. U.K. corporations and their investors are much more comfortable operating at much higher risk levels than ever before; U.K. corporations have on average the lowest credit rating in history which is another indication of how comfortable today's corporations are at operating in high risk situations.

Maximizing profits or increase shareholder/Wealth value?

The most effective way to obtain and maintain the concentration of leaders, and managers in the excellence of management is through the Body-Centered Principles. In this regard the application of the principles of accounting generally accepted as consistency or uniformity, materiality, prudence and cost valuation basis, are essential to the implementation of policies consistent for the organization (Arya, Glover, 1996, pp.519-533.).

What is it? What is your goal? Allow a faster and stronger focus to achieving corporate goals. Achieving that requires speed and strength of harmony and balance, and in turn achieves this harmony and balance requires concentration.

This article aims to demonstrate that there is harmony and balance, when the objectives and goals of the company are geared ...