Business Finance and Capital Structure Essay

1118 WordsJul 3, 20155 Pages
Business Financing and the Capital Structure Financial planning involves the evaluation of sources and resources available to an individual or firm to accomplish financial targets and aims. The financial planning process includes realizing long term objectives and goals, evaluating the current financial conditions and environment, classifying the cost requirement for the desired financial objectives and analyzing the different financing and investing options available. Working Capital Management is the process of planning and controlling the level and mix of current assets of the firm as well as financing these assets. Specifically, Working Capital Management requires financial managers to decide what quantities of cash, other liquid assets accounts receivables and inventories the firm will hold at any point of time. Working capital is the capital you require for the working of i.e. functioning of your business in the short run. Gross working capital refers to the firm’s investment in the current assets and includes cash, short term securities, debtors, bills receivables and inventories. It is necessary to concentrate on the fact that the investment in the current assets should be neither excessive nor inadequate. WC requirement of a firm keeps changing with the change in the business activity and hence the firm must be in a position to strike a balance between them. The financial manager should know where to source the funds from, in case the need arise and where to invest in case of excess funds (Brealey, Myers, 2011). Marketable securities are securities or debts that are to be sold or redeemed within a year. These are financial instruments that can be easily converted to cash such as government bonds, common stock or certificates of deposits. If these securities and/or debt are anticipated to be converted into cash within one year, they are listed at their

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