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Thread:
Raising Capital DB3
Post:
RE: Raising Capital DB3
Author:
Alexandria Adams
Posted Date:
September 23, 2012 7:09 PM
Status:
Published
Hello,
I appreciate the information that you imputed about ensuring that the future of a company is taken into
consideration when making plans for the financials of the company. Sometimes a company can be so
focused on dealing with a current situation that they forget the future consequences for the actions
that they make in the present. Ken Daly in Financial Executive also speaks on the topic as he states
“Compensation discussions need to be forward-looking. Board members should know the best and
worst-case scenarios for pay outcomes” (2011, p. 53). Knowing this information will allow the company
to be ahead when making any future decisions in the case that the worst-case scenarios come to
actuality. Having a future plan for repayment also ensures the shareholders that the company is
handling their investment responsibly, which will assist in their future plans for contributing funds.
References
Daly, K. (2011, January). Corporate performance metrics to top board agendas. Financial Executive,
27(1), 50-53. Retrieved September 20, 2012, from Business Source Complete
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Thread:
Discussion Board 3- Odell
Bizzell Post:
RE: Discussion Board 3- Odell Bizzell
Author:
Alexandria Adams
Posted Date:
September 23, 2012 5:13 PM
Status:
Published
Hello,
I am in agreement about what you noted about getting information out concerning the new product
released to the media and their involvement in your process. Media is a major part of marketing which
can assist greatly in cases such as this, because it involves communication. When dealing with
shareholders communication, and more specifically marketing can be a major asset. In the article “
Marketing Initiatives, Expected Cash Flows, and Shareholders’ Wealth,” it is further noted that “a
marketing action that does not affect the firm’s expected sales can still affect the investors’ expected
cash flows by altering the shape of the probability distribution of sales” (Rao & Bharadwaj, 2008, p. 23).
Making marketing essential in cases where cash flow needs to be increased in order to assist in the
overall bottom line of the company, as well as keeping shareholders happy by maximizing their
investments. However, the effects of marketing strategies can take longer to see, and some type of loan
might still be necessary depending on the time frame of when the information is initially released.
References
Rao, R., & Bharadwaj, N. (2008, January). Marketing initiatives, expected cash flows, and shareholders'
wealth. Journal of Marketing, 72(1), 16-26. Retrieved September 23, 2012, from Business Source
Complete.
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Thread:
Discussion Board 3- Tia
Peeks Post:
RE: Discussion Board 3- Tia Peeks
Author:
Toni Johnson
Posted Date:
September 23, 2012 2:42 PM
Status:
Published
Toni Johnson
Liberty University
Dr. Lyle Bowlin-
BUSI530 Reply to Tia
Peeks
Tia, I enjoyed reading your perspective on growing principle within a firm. In Deuteronomy
8:18, it teaches us that, “But remember the LORD your God, for it is he who gives you the ability to
produce wealth, and so confirms his covenant, which he swore to your forefathers, as it is today” (NIV).
Property assets can be used to obtain money and fund current projects to lead the corporation and
grow capital for the next two years (Maxwell, 2009). I think it was a very good idea to have a meeting to
get everyone on the same page, and analysis of the issue can be reviewed. It is critical that executives
communicate effectively, so in times of crisis, they are able to make more efficient business decisions.
References
Maxwell, E. (2009). This year cash is king. The Estates Gazette, , 59-60. Retrieved from
http://search.proquest.com/docview/223770888?accountid=12085
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Thread:
Discussion Board 3- Odell
Bizzell Post:
RE: Discussion Board 3- Odell Bizzell
Author:
Tia Peeks
Posted Date:
September 23, 2012 1:52 PM
Status:
Published
Discussion Board Forum 3
Reply to Odell Bizzell
Tia Peeks
Business 530_B21
Dr. Lyle Bowlin
September 23, 2012
Hello Odell,
I enjoyed reading your discussion board and your views in ways to keep the company from failing in the
market. You are correct when you state that the CFO’s challenge is getting the investors and creditors to
see the power in the new project development that should hit the store in two years. There would be
some concerns that both parties would vary their opinions from one extreme to the next. Some
stakeholders may see this product as a successful item but some may view it as something that will not
generate enough revenue to keep them satisfied with this investment. “Stakeholders have an evaluation
of their own benefits which is specific to them, but they also give different weights to the satisfaction of
other stakeholders' interests” (Mygind, 2009). It is important to receive input from your stakeholders
with any financial decisions that you may have because this can either help the company or cause a
great distress in the future.
At this time, it would not be beneficial to take out an unsecured loan or line of credit with a bank unless
you have exhausted all other financial assistance you can receive at that time. However as a CFO, you
will also need to analyze the failures foreseen in the company because this can also assist you with
increasing the cash flow for your organization."Understand how your cash flow relates to your monthly
balances, and manage your operating cycles so there is always enough cash flow to cover you” (Baker,
2009).
References
Mygind, N. (2009). Stakeholder ownership and maximization. Corporate Governance, 9(2), 158-174. doi:
10.1108/14720700910946604
Baker, G. (2009). Bright ideas for cashflow control. NZ Business, 23(5), 36-41. Retrieved on September
20, 2012 from http://search.proquest.com/docview/204579458?accountid=12085
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Thread:
Discussion Board 3- Tia
Peeks Post:
RE: Discussion Board 3- Tia Peeks
Author:
Audrey Gobin
Posted Date:
September 22, 2012 10:12 PM
Status:
Published
Audrey Gobin
Dr Lyle Bowlin-BUSI530
September 22, 2012
Tia you provided great information in regards to the importance of cash flow within firms. The
controlling and reviewing of cash must be done on a regular basis in order for a firm to reach its full
financial potential. In many cases mangers of firms create budgets so that they will stay aware of the
amount of money that they would have accumulated at the end of each period (Stephenson, 2010). In
order for firms to keep their revenues flowing consistently, they should explore options such as sweep
accounts, controlled-investment accounts, end of the day sweep accounts, and lock-box accounts (Goel,
2012). By using these particular accounts, firms are preventing themselves from the financial disasters
that many organizations undergo when they are not organized and well managed. Overall great
leadership and affective resources aid firms in increasing their overall revenue. (Proverbs 16:9, NIV)
teaches that, in their hearts humans plan their course, but the Lord establishes their steps.
Goel, S. (2012). Efficient cash management. Management Accountant, 47(3), 333-334. Retrieved from
http://search.proquest.com/docview/1011458280?accountid=12085
Stephenson, T., & Porter, J. (2010). Part 4 of 6: Excel-based budgeting for cash flows: Cash is king!
Strategic Finance, 91(11), 34-41. Retrieved from http://search.proquest.com/docview/229809510?
accountid=12085
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Thread:
Raising Capital DB3
Post:
RE: Raising Capital DB3
Author:
Thomas Mattox
Posted Date:
September 22, 2012 1:59 PM
Status:
Published
Reply to Scott Prochniak: Raising
Capital Strengths
Your analysis is thorough and considers multiple points. First, you address the necessity for cash over a
two year period for product development. Any solution that does not cover two years is short sighted.
Secondly, the company must structure the bonds in such a way to provide a return on investment
commiserate with the risk investors are taking and at least equal to investments of similar risk (Brealey,
Myers, & Marcus, 2012, p. 318). Failure to do so would make the investment unattractive.
Weaknesses
Consider contrasting the option of debt financing to equity financing. By raising capital through equity
financing, you may lose total autonomy of ownership, but you reserve the right to plowback profit as
needed to keep operations running instead of paying fixed returns of the bonds issued (Brealey, Myers,
& Marcus, 2012, p. 318).
Spiritual Application
The Bible doesn’t often speak well of debt. Proverbs 22:7 says "...the borrower is slave to the lender."
We understand the ramifications of unwise accumulation of debt. It can absolutely enslave you to your
lender and to your job. However, I think we miss it if we don’t allow ourselves to operate with wisdom
in our investments and utilize debt financing as a viable investment option.
References
Brealey, Richard A., Myers, Stewart C., Marcus, Alan F. (2012). Fundamentals of Corporate Finance. New
York: Mcgraw-Hill Irwin.
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Thread:
Cash is KIng
Post:
Cash is KIng
Author:
Anjerrika Anthony
Posted Date:
September 20, 2012 11:41 PM
Status:
Published
CASHING IN ON FRUGALNESS AND
FAITH ANJERRIKA ANTHONY
LIBERTY UNIVERSITY
BUSI 530-B21 LUO
DR. BOWLIN
August 30, 2012
“I have three precious things which I hold fast and prize. The first is gentleness; the second is frugality;
the third is humility, which keeps me from putting myself before others. Be gentle and you can be bold;
be frugal and you can be liberal; avoid putting yourself before others and you can become a leader
among men.” (Goodreads 2012)
— Lao Tzu
Successful companies are not born they are made. CFO’s, endure the burdensome task of
insuring the success of a company in the worst of economic times. If a company is on the brink of losing
its cash inflows within six months, the CFO must create innovative ways for sustaining the company’s
success. His ability to manage this risk, determines the future of the company. The old/new testament
leaves two vital examples of the CFO utilizing methods of faith and frugalness for the good of all. For
instance, Joseph dreamed about famine and instructed Pharaoh with the best method of approach for
the famine situation in the land. He stated, “35 they should collect all the food of these good years that
are coming and store up the grain under the authority of Pharaoh, to be kept in the cities for food. 36
This food should be held in reserve for the country, to be used during the seven years of famine that
will come upon Egypt, so that the country may not be ruined by the famine.” (Genesis 41:35-36 New
International Version) Because of his decision, all of Egypt had to come to Pharaoh to purchase food.
Similarly, the CFO ability to decrease expenses and increase product usage, increases cash-flow while
helping the company save money.
Decreasing Expenses
Effective saving strategies for the CFO to decrease spending includes; limiting marketing,
cutting overtime, and reduction of bonuses. These techniques may lower morale amongst employees.
However, an incentive for innovative ways to market the business for free and volunteer chores that
trades in for
yearly bonuses, may motivates the employees to become a part of the company. In-turn employees
may consider investing in stocks, helping sustain a cycle of cash-flows. Investing in a bond for a year to
save the monies from cuts-backs also increases stability for future cash flows.
Increasing Product Usage
Researchers found increasing market product usage helps save money and increases sales. For
instance, “Larger package sizes increase the amount of product consumer’s use at one time.” (Keller &
Kotler 2012) Therefore, the CFO re-packaging the product to re-distribute the product in higher
quantity and higher cost causes sales to increase for the industry. Other methods of advertising, allow
the consumer to see the product in a variety ways to increase product usage. For example, “One
strategy is to tie the act of replacing the product to a holiday, event, or time of year. Another might be
to provide consumers with better information about when they first used the product or need to
replace it.” (Keller & Kotler 2012) Therefore, the CFO’s ability to creatively couple the incentive
program with marketing allows the employees to engage in a task that promises great rewards within
the year. This method also helps retain and motivate employees, which leads to loyalty. The bible
teaches the parable of five barley loaves and two fish (John 6:9 New International Version), in order to
demonstrate how faith, self denial, and a master can take what appears to be of little significance and
change it into a never ending miracle. A Christian CFO’s desire to become like his Master gives him
wisdom to balance the risk associated with successful companies.
References
(n.d.). Retrieved September 19, 2012, from Crosswalk: www.biblestudytools.net
(2012). Competitive Dynamics. In P. K. Keller, Marketing Management (pp. 298-308). New Jersey:
Pearson.
Unknown. (n.d.). Goodreads. Retrieved September 20, 2012, from
http://www.goodreads.com/quotes/tag/frugality
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Thread:
DB3
Post:
DB3
Author:
Christopher Church
Posted Date:
September 20, 2012 11:24 PM
Status:
Published
Christopher Church
Business 530- Managerial Finance
Dr. Lyle Bowlin
Obtaining Company
Funds Introduction
Cash flow is vital to a businesses’ success. Research and development, marketing, budgeting and project
development all depend on it. While economic woes continue to mount across the nation many
businesses are examining the best ways to raise funds that are crucial, not only to future successes, but
to their survival.
Increasing Cash Flow
Struggling companies may find it hard to devote funds to new projects when the daily financial needs of
the company are taxing enough. Even the most innovative ideas need cash flows in order to be realized.
For example, a struggling company is working on a new product that will revitalize business. The
company will run out of cash in the next six months and the new product will not be ready for public
launch for another two years. By any account, the company is in a very difficult position but it is not
without options. A short term loan would provide a quick infusion of cash but considering the long time
frame (2 years) until the new product launch the cash could be depleted before product launch.
Another option is to allow the public to buy shares of the company through an initial public offering
(IPO).
Benefits of IPOs
An IPO would provide several benefits over a loan, one of which is diversified investors. Tirole (1993)
and Thadden (1998) note that IPOs subject companies to outsider monitoring by analysts, investors and
banks and must therefore increase efficiency and effectiveness since they are no longer monitored by a
smaller, private group of owners (as cited in Benninga, Helmantel and Sarig, 2003). Initial public
offerings also make company shares more liquid which increases their value (Amihud and Mendelson as
cited in Benninga, Helmantel and Sarig, 2003).
In addition to increased efficiency and stock value an IPO will also provide an opportunity to be listed
as a publicly traded company on a stock market index such as the New York Stock Exchange or
NASDAQ. Being listed through an index will raise the visibility of the company as well as its products. In
the aforementioned example of a company with a new product in development this would be an
excellent opportunity to draw attention (and investors) to the project. With only six months of cash on
hand an IPO would provide a much needed cash infusion that would allow continued development of
new products as well as provide a return to stakeholders.
Drawbacks to IPOs
While there are several benefits of an IPO it is not without drawbacks. Conducting an initial public
offering will incur a lot of cost resulting from hiring underwriters, legal fees, accounting fees and
registering the IPO (Roosenboom, 2012). The initial cost of rolling out the IPO may cut into the cash flow
needed to continue working on important projects. Another drawback of IPOs is stakeholders can sell
shares of the company at any time of their choosing. For example, a major recall on a popular product
may lead to a mass selling of stock which results in a drop in stock value. Publicly traded companies must
meet the demands of their stakeholders in order to maintain their trust.
Stakeholder Value
Companies must create value for their stakeholders. Making sure project investments with positive net
present value and creat value. Involving stakeholders in company decisions will also help establish
relationships and a feeling that the company and its stakeholders are working together to produce
positive and long-lasting results for both parties. Finally, making sure management and shareholder
goals are aligned will create a system that works together rather than each group looking out for their
own interests.
Conclusion
Companies with big ideas and innovative products need cash flow in order to grow and continue
production. In lean economic times having adequate cash flows can be problematic and even force
businesses to close. An initial public offering is a great way to gain much needed cash as well as
introduce a whole new segment of the population to new and exciting products and possibilities. While
IPOs can pose some challenges by opening up decision making and direction to a larger group of
stakeholders the opportunities for exposure and increased cash flow make it an attractive option.
References
Benninga, S., Helmantel, M., Sarig, O. (2003). The timing of initial public offerings.
Journal of Financial Economics, 375, 115 - 132. Retrieved
September 20, 2012 from Summon database.
Roosenboom, P. (2012). Valuing and pricing ipos. Journal of Banking and Finance,
36,6, 1653-1664. Retrieved September 20, 2012 from Summon database.
Attachment: BUSI530_DB3_Final.doc (34 KB)
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Thread:
Raising Capital
Post:
Raising Capital
Author:
Bannon Squirewell
Posted Date:
September 20, 2012 11:09 PM
Status:
Published
The simple answer to the company’s dilemma is raising capital. There are several avenues to raising
capital. One source of capital is an angel investor. Angel investors are designed for small and medium
companies and contribute money, skills, knowledge, and business contacts (Ramadani, 2012). Angel
investors are typically wealthy and have business experience. A downside to the angel investor is their
desire to remain anonymous, therefore their knowledge may not be able to be capitalized upon.
Another source of capital is venture capitalists. These investors generally expect preferred stock in
exchange for their investment (Gaff, 2012, p. 11). Another source of funds is the government. The US
government has funds allocated for start up and new businesses (Gaff, 2012, p. 11). A viable option for
this scenario would be peer to peer lending. Peer to peer lending is “ facilitated through websites
devoted to
matching investors with individuals or companies looking for capital” (Gaff, 2012, p. 12). Peer to peer
lending is a resource for companies that are looking for a quick stream of money (Gaff, 2012, p. 12).
Peer to peer lending have higher interest rates with shorter loan terms. Lastly, a source of raising capital
is venture lending. In venture lending, the investor accepts equipment and assets as collateral in
exchange for cash (Gaff, 2012, p. 12). Like peer to peer lending, funds from venture lending come with
higher interest rates but are easier to obtain than commercial bank loans (Gaff, 2012, p. 12). The best
source of raising capital for the company in question is peer to peer lending.
A bible verse relating to this topic is Luke 6:35 (ESV): “But love your enemies, and do good, and lend,
expecting nothing in return, and your reward will be great, and you will be sons of the Most High, for
he is kind to the ungrateful and the evil”.
References
Gaff, B.M.; Kimball, R.N.; Hanson, J.M.(2012). "Raising capital: where to find it, how to secure it, and tips
on what to avoid," Computer , (45)7, pp.11-13. doi: 10.1109/MC.2012.240
Ramadani, V. (2012). “The importance of angel investors in financing the growth of small and medium
sized enterprises.” International journal of academic research in business and social sciences. ( 2)7.
Retrieved from http://www.hrmars.com/admin/pics/929.pdf.
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Thread:
Discussion Board 3
Post:
Discussion Board 3
Author:
Toni Johnson
Posted Date:
September 20, 2012 10:22 PM
Status:
Published
Toni Johnson
Dr Lyle Bowlin-BUSI530
September 20, 2012
Discussion Board 3
Keeping The Company Afloat
Critical decisions that could make or break a corporation are made on a constant basis. The CFO of a
company is key personnel that ensures such corporate decisions are assessed from a Christian and
perspective. “The notion that CFO’s should add to their traditional roles of compliance, reporting and
control and become business partners and strategists has been around for some time” (Howell, 2012).
The initial modification would be to lower the current costs that the company is generating, and saving
any available income. It is important to make sure the company is able to operate within its means,
without sacrificing quality and value. “On the first day of every week, each one of you should set aside a
sum of money in keeping with your income, saving it up, so that when I come no collections will have to
be made” (1 Corinthians 16:2, NIV). Analyzing the company’s income statements, along with, profits
versus cash flow will be significant in determining depreciation and cash versus accrual accounting
(Brealey et al, p. 59-61). Secondly, equity financing would be the phase where cash can be put back into
the business by either the owner or any available investors. This will not only aid in keeping the
company operational, but will, also, maintain a happy and healthy relationship with the stakeholders.
The investors will earn dividends and raise the value of stock at the same time.
References
Brealey, Richard A., Myers, Stewart C., Marcus, Alan F. (2012). Fundamentals of
Corporate Finance, (7th ed.). Boston: Mcgraw-Hill Irwin.
Howell, Robert. (2012). Becoming a Strategic CFO. Financial Executive, 28(3), 38-43.
Retrieved from http://search.proquest.com.ezproxy.liberty.edu:2048/docview/1014263156/abstract?
accountid=12085
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Thread:
Discussion Board 3
Post:
Discussion Board 3
Author:
Pauletta Windham
Posted Date:
September 20, 2012 9:07 PM
Status:
Published
Pauletta Windham
Business 530_B21_201240
Dr. Lyle Bowlin
September 20, 2012
The world of corporate finance is beneficial when it is established from a Christian worldview.
Proverbs 16:3 says, “Commit to the LORD whatever you do, and your plans will succeed.”t Being a good
steward of God’s resources by managing the cash flow of a company is one way to be successful in
corporate finance.
The statement of cash flows is a summary of the money taken in and paid out by a company
(Brealey,Marcus, & Myers, 2010). It also reflects investments and similar financing transactions
(Brealey,Marcus, & Myers, 2010). To manage the cash flow of a company successfully means that a
person is governing a positive net income for the company and overseeing continual cash flow
operations. William Lynott, author of Managing Cash Flow said, even when managing the smallest of
operations, that these concepts are significant (Lynott, 2004).
Positive cash flows are formed by setting goals and making wise investment decisions. One goal
mentioned for financial managers is to maximize the market value of shareholders’ investments in
their company (Brealey,Marcus, & Myers, 2010). It is not always in the best interest of the individuals
to maximize the market value of the shareholders’ investments, and it can be rooted in greed. A good
scripture on the consequences of greed is 1 Timothy 6:9, and it reads, “but those who desire to be rich
fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin
and destruction (English Standard Version).
Making wise investment decisions, the second thing mentioned to produce positive cash flows, involves
risk. Trade, bonds, and stocks are typical short and long-term investments for financial managers
(Amran & Kulatilaka, 1999). In 1 Timothy 6:19, Paul speaks of storing up treasures as a good foundation
for the future. To save for the future and invest in the future is a good foundation for financial success.
When dealing with cash flow, the future may be uncertain and unsteady. Finance managers must
establish their businesses on trusting in the Lord with all of their hearts and leaning not on their own
understandings (Proverbs 3:5, King James Version). It is important because trusting in God and seeking
him first, as in Matthew 6:33, creates a foundation for Christ and achievement.
References
Amram, M., & Kulatilaka, N. (1999). Real Options: Managing Strategic Investment in an Uncertain World.
(M. N. K. Amram, Ed.)Options (p. 246). Harvard Business School Press. Retrieved from
http://www.lavoisier.fr/notice/frXWOAKSKASAWLSO.html
Brealey, R., Marcus, A., & Myers, S. (2010). Fundamentals of corporate finance. Boston: McGraw-Hill
Irwin.
William J Lynott. (2004, June). Managing Cash Flow. Greenhouse grower, 22(6), 110-112. Retrieved
September 19, 2012, from Career and Technical Education. (Document ID: 653166191)
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Thread:
Brice Leckpa - DB3 (Week
5) Post:
Brice Leckpa - DB3 (Week 5)
Author:
Brice Leckpa
Posted Date:
September 20, 2012 8:55 PM
Status:
Published
Discussion Board 3
Brice Leckpa
Managerial Finance, BUSI 530
Dr. Lyle Bowlin
Liberty University
As the CFO of this company that will account for huge revenue in 2 years but has no liquidity to survive
until then, I’m definitely facing a big challenge. But the first thing I will do is look to god as it is said in
the Bible Ps 27:1 “Tough challenges are like mountains. They’re HUGE! And when challenges tower over
us, we can easily feel tiny and be overwhelmed by it all. When challenges bring us down and the future
looks uncertain, look to God.”
My two options in this situation are: 1. taking a loan from a bank or government agency such as the
Small Business Administration (SBA) also called ‘debt financing’ and 2. selling a part of the business or
‘equity financing’. The main advantage of debt financing is that the lender does not receive an
ownership share in the business and it offers businesses a tax advantage since interest paid on loans are
generally tax deductible. However carrying too much debt is a problem because it increases the
perceived risk associated to businesses making it unattractive to investors.
Equity financing would take the form of money obtained from investors in exchange for an ownership
share in the business. The main advantage to equity financing is that the business is not obligated to
repay the money. Instead, the investors hope to reclaim their investment out of future profits. Its main
disadvantage is that the investors become part-owners of the business, and thus gain a say in business
decisions. "Equity investors are looking for a partner as well as an investment, or else they would be
lenders” (Jefferson, 2001).
For my company to survive the next 2 years I will consider going with both financing methods and I will
be guided by the debt-to-equity ratio defined as “the company’s long-term debt divided by equity”
(Brealy, Myers, & Marcus, p93, 2012)”. Although debt-to-equity ratio varies by industry a trivial rule of
thumb is that a reasonable ratio should fall between 1:1 and 1:2. So if we need $3 to survive for the
next 2 years, we will be borrowing $1 in long-term debt financing and we will be selling $2 in shares of
the company. With this strategy we won’t carry too much debt so we will stay attractive to potential
investors and we will have raised enough cash flow for the next 2 years while limiting the number of
new shareholders engaged in the company’s management.
References
Brealy, R. A., Myers, S. C., Marcus, A. J. (2012). Accounting and Finance. Janicek, M. &
Fisher, K. L. (Eds.), fundamentals of corporate Finance (52-77). New York: McGraw-Hill
Irwin. Jefferson, Steve. "When Raising Funds, Start-Ups Face the Debt vs. Equity Question."
Pacific Business News, 3 August 2001.
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Thread:
Raising Capital DB3
Post:
Raising Capital DB3
Author:
Scott Prochniak
Posted Date:
September 20, 2012 8:49 PM
Status:
Published
Discussion Board 3
Scott Prochniak
Managerial Finance, BUSI 530
Dr. Lyle Bowlin
Liberty University
The situation within the company in question suggests providing a stable environment long enough for
the research and development department to complete their project and bring the product to market.
The low level of cash flow can be concerning, however, the greater issue is the financial stability through
the time period required. Up front funding of new projects, and growth may cause the management to
operate more carefully due to the high costs related to task completion, (Cherif & Elouaer, 2008). I
would suggest a bond issue for the company that allowed for an inflow of capital to be used as an
investment mechanism and cash reserve. Providing a bond issue with a return on investment larger than
the typical stock trade or treasury issue will attract investors. The term of the bond should be greater
than the projected market entry of the new product to allow for the return of revenue. A ten-year bond
issue at ten percent would sufficiently finance the operational costs over the next two years. Interest
payments can be deducted from pretax income, therefore reducing the cost of capital by the amount of
tax- deductible interest payments; these payments therefore reduce taxable earnings and the cost of
capital, (Brealy, Myers, & Marcus, 2012). If the company sees a substantial return from the newly
created product in the two-year time line, the company could also start to buy back the issued bonds on
the open market and reduce their debt ratio. If the product earns sufficient returns to repay the bonds
at maturity, I would also consider and initial stock issue to leverage the high returns of the company.
“The ability to fund the future is absolutely critical, even if the organization is not participating in the
capital markets now, the board needs a certain level of understanding of the issues,” (Lee, 2007, p.45).
The parable of the talents shows us that to those that use wisely what is given will be given more. We
also learn through Proverbs that to co-sign on debt leads to entrapment through the debtor. Invest your
money wisely, or lose it to those who will. Therefore, it will be important to manage these resources
carefully because the money invested is an investment in the company’s future through individual
investors. These investors trust the money invested will earn the guaranteed return, if not they will
move their money elsewhere. Also, the company must be cognizant to realize the debt should be repaid
in a timely manner, and even repurchased when possible to limit the burden of debt on the
organization. The company should do due diligence and provide to their investors, as well as maintain
an operational environment to facilitate an atmosphere that will encourage creative thought, security
and stability to the work force, therefore reducing workplace turmoil, employee turnover, and
encourage pride in the organization. Managing this investment with a fiscal responsibility and biblical
perspective will allow the organization to develop their products, use capital fundraising to accomplish
their required financing, and earn the respect of their investors through timely interest payments on the
bonds issued.
References:
Brealy, R. A., Myers, S. C., Marcus, A. J. (2012). Accounting and Finance. Janicek, M.
& Fisher, K. L. (Eds.), fundamentals of corporate Finance (52-77). New York: McGraw-Hill Irwin.
Cherif, M., & Elouaer, S. (2008). Venture capital financing: A theoretical
model.The Journal of Applied Business and Economics, 8(1), 56-81. Retrieved from
http://search.proquest.com/docview/218717118?accountid=12085
Lee, A. R. (2007). The board's role in capital financing. Hospitals & Health
Networks, 81(6), 43-8. Retrieved from http://search.proquest.com/docview/215301210?
accountid=12085
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Thread:
Adrian B. DB 3
Post:
Adrian B. DB 3
Author:
Adrian Bumbut
Posted Date:
September 20, 2012 8:40 PM
Status:
Published
Discussion Board Forum 3: Funding
Proposal Adrian Bumbut
Liberty University
BUSI 530: Managerial Finance
Dr. Lyle Bowlin
September 20, 2012
Fred Smith is well-known for his innovative air and ground next day delivery system called FedEx. Like
many first-year companies, FedEx struggled to stay in business dealing with many financial difficulties
such as purchasing capable jets to deliver nationwide, hiring and training pilots as well as delivery and
office staff (Brealey, Myers, Marcus, 2012, p.4). After a few years, with the help of venture capitalists the
company achieved financial stability raising over $24.5 million. With steady funds, FedEx was able to
upgrade its fleet of jets acquiring bigger and better airplanes and expanding its operations (Brealey,
Myers, Marcus, 2012, p. 4). In order to pay for these investments FedEx made some very good financing
decision and one of them was selling shares of stock to the general public in an initial public offering
(IPO).
Being the CFO of a struggling company with limited amounts of cash requires making appropriate
investments and accurate financing decisions. Being under a six month only cash availability and not
willing to sacrifice releasing employees, my advice would be to follow the footsteps of FedEx and begin
selling shares of stock to the general public in an initial public offering (IPO). This would result in
stockholders becoming part-owners of the company in relation to the number of shares they
purchased. The next critical argument would entail the amount of shares the company would sell and to
what price. As our company becomes stable again, we can successfully continue operations of our new
and innovative product that guarantees to not only expand our operations but also revolutionize the
way our industry does business.
FedEx was able to prove to their stockholders that their ground-breaking shipment system will
modernize and improve next-day deliveries nationwide. Demonstrating the capabilities of our new
revolutionizing product will attract investors and ultimately increase cash flow.
According to Chris Anderson (2009) as a CFO it is essential to establish and maintain lines of
communication with investment bankers, financial analysts, and shareholders in conjunction with the
President (Bizmanualz, 2009). Writer Eddy Hood describes a CFO in his article CFO Responsibilities as the
“supervisor of the Accounting and Finance departments” (Hood, 2012).
As a Chief Financial Officer it is also important to explain earnings and results as well as budgeting and
expense control. As Christian leaders in different financial institutions our goal should be to maintain
honesty, integrity and value employee relationships avoiding spending the company’s funds on
unwarranted personal luxuries. Proverbs 19:1 (ESV) encourages us to maintain our integrity not only in
front of God but also in front of the people we encounter in our everyday lives: “Better is a poor
person who walks in his integrity than one who is crooked in speech and is a fool”.
Reference:
Anderson, C. (2009). What are the top ten responsibilities of a new CFO? Bizmanual. Retrieved
from: http://www.bizmanualz.com/blog/what-are-the-top-ten-responsibilities-of-a-new-cfo.html
Brealey, R. A., Myers, S. C., & Marcus, A. J. (2012). Fundamentals of Corporate Finance 7th Edition. New
York: McGraw Hill Irwin.
Hood, E. (2012). CFO responsibilities. Ignite Spot-Outsourced Accounting. Retrieved
from: http://www.ignitespot.com/ignite-blog/2012/01/cfo-responsibilities-explained/
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Thread:
Cash is king
Post:
Cash is king
Author:
Alexandria Adams
Posted Date:
September 20, 2012 8:36 PM
Status:
Published
When the phrase “cash is king” is spoken of, the first thing that comes to mind is Jesus is King of kings.
As a Christian CFO, the first thing that I would have to do is to pray. Before making major decisions it is
always good to seek counsel, and there is no other who is better to seek counsel from when presented a
situation concerning the “cash king” than the King of kings. Matthew 17:24-27 reveals Jesus’ ability to
make money come from unexpected places; therefore, Jesus has the ability to assist with any financial
problems, especially from a struggling company.
Keeping the stakeholders happy is important to a firm and even more so for a struggling company.
Oftentimes, people are more willing to stay with a company if they have the right communication on
what the company is facing and what it is seeking to do to ratify the issue. After Godly counsel has been
sought and a plan has been made, it is best to communicate that plan to inform the stakeholders of
what is to come so that they will not be shocked of the potential upcoming and short-term decline or
since of being stagnant. In “Corporate Performance Metrics to Board Agendas,” one of the imperatives
in a corporation is to ensure that communication is established with shareholders using clear language
that explains how the company has paid for performance (Daly, 2011). In communicating this
information, it is also good to focus more on what is to come and the importance of their commitment
on the outcome of a new revolutionary development that will potentially bring in more increase for
years after development making the company a great long-term investment. This communication
should also continue through the developmental stages of the revolutionary product allowing the
stakeholders see what their patience and their past funding is building, and the marketing if done
correctly, could also encourage more funding from the shareholders for the new product.
The other important issue is keeping the company afloat during the developmental stages of the new
product. One important factor in creating more cash flow is to look for internal ways to reduce costs by
finding areas where the company might be overspending. These internal cost savings can be further
assisted by outsourcing certain duties that are currently being done in the corporation as well as some
that are in the development of the new product. The company should also look at equipment and other
assets to determine if certain items can be sold or leased. If the company is one in which customers do
not pay a bill entirely up front and bills are left outstanding, customer relationships would be
considered to determine if relationships are bringing income or are too costly to keep. Nurturing the
wrong relationships can mean losing the ones that are more important, making it better to sever ties
with weaker clients and focus on the ones that bring in steady capital (Michalowicz, 2012). After
implementing those strategies, a loan should be considered to cover any other outstanding costs that
would be needed.
References
Daly, K. (2011, January). Corporate performance metrics to top board agendas. Financial Executive,
27(1), 50-53. Retrieved September 20, 2012, from Business Source Complete
Michalowicz, M. (2012, August 20). Avoid these 6 recipes for business disaster. In The Wall Street
Journal. Retrieved September 17, 2012, from
http://online.wsj.com/article/SB10000872396390443570904577545454118386104.html?
KEYWORDS=article+on+cash+entrepreneurial+venture
Attachment: Discussion board Module 3.doc (30 KB)
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Thread:
DB #3 - Raising Capital
Post:
DB #3 - Raising Capital
Author:
Thomas Mattox
Posted Date:
September 20, 2012 3:41 PM
Status:
Published
Our company has two primary options to raise capital: equity financing or debt financing. Through
equity financing, our company would receive cash in exchange for partial ownership and a future share
in profits by the investor (Brealey, Meyers, & Marcus, 2012, p. 6). The advantage of using equity
financing as a way to raise capital is that our company can pay back the loan amount over a fixed period
of time. Additionally, our company could focus on making the new product profitable rather than
worrying about paying back investors immediately. A disadvantage of financing through equity is that
our company potentially loses partial autonomy over decision making (Chiang & Hanke, 2010).
Through debt financing, our company would receive cash by selling bonds or notes to individual or
institutional investors (Brealey et al, p.7). In return for lending the money, the individuals or institutions
become creditors and receive a promise that the principal and interest on the debt will be repaid at a
certain time (Brealey et at, p.7).
As we consider our capital structure decision, our company must consider the low level of cash flow and
the length of time necessary for our new product development. These primary considerations point
toward using equity financing as our main source of capital. With a low level of current cash flow and a
two year product development timeline, it does not make sense for us to pursue debt financing. Through
debt financing, our company would not have the resources to pay back principal and interest to the
investors for at least two years, assuming the new product is successful (Romano, Tanewski, & Smyrnios,
2001).
In order to keep stakeholders happy, our company must consider paying dividends to our investors at
levels commiserate with the level of risk assumed on their part while also plowing back enough cash to
maintain the competitive market share gained by the development of our new product (Brealey et al, p.
359). Additionally, our stakeholders require that our company exceed the opportunity cost of capital of
similar risk investments as we invest in the project to develop our new revolutionary product (Brealey
et al, p. 359). Therefore, our company should use equity financing as the primary source of raising
capital for the new project.
References
Brealey, Richard A., Myers, Stewart C., Marcus, Alan F. (2012). Fundamentals of
Corporate Finance. New York: Mcgraw-Hill Irwin.
Chiang, W., Di, H., & Hanke, S. A. (2010). Debt or equity financing? Analyzing relevant factors. The Tax
Adviser, 41(6), 412-417. Retrieved from http://search.proquest.com/docview/521247918?
accountid=12085
De Menocal, Daniel C, JR, Bannon, E., O'Brien, P.,K., & Baghai, A. A. (2010). Continuous equity financing
with forwards: A practical solution to strategic capital raising. Corporate Finance Review, 15(2), 12-24.
Retrieved from http://search.proquest.com/docview/801296839?accountid=12085
Romano, C.A., Tanewski, G.A., Smyrnios, K.X. (2001). Capital structure decision making: A model for
family business. Journal of Business Venturing, 16(3), 285-310. Retrieved from
http://www.sciencedirect.com/science/article/pii/S0883902699000531
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Thread:
Discussion Board 3- Tia
Peeks Post:
RE: Discussion Board 3- Tia Peeks
Author:
Tia Peeks
Posted Date:
September 20, 2012 2:50 PM
Status:
Published
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Thread:
Discussion Board 3- Tia
Peeks Post:
Discussion Board 3- Tia Peeks
Author:
Tia Peeks
Posted Date:
September 20, 2012 2:47 PM
Status:
Published
Discussion Board Forum 3
Tia Peeks
Business 530_B21
Dr. Lyle Bowlin
September 20, 2012
Companies are faced with many tough decisions that could either cause the organization with succeed
or fail. However, if a company does not have a sufficient cash flow then this can cause a company to fail
which can result to having their doors closed for good. As a Chief Financial Officer (CFO) of this
struggling company, I would call an imperative meeting with all of my executives so that we could
collectively gather information on all of the areas within the organization so that we could make some
adjustments to help cut the immediate expenses. Being able to cut some of our expenses could assist
with having additional cash flow for the organization. As the CFO, the need to analyze the failures
foreseen in the company is important because can assist in determining what direction we need to take
to help increase the cash flow within the organization. By comparing our price structures with our
competitors will also allow us to see if we are undercharging on the merchandise. It is also important to
take a look at all of the debt obligations so that the company can refinance to lower their monthly
payments. "Understand how your cashflow relates to your monthly balances, and manage your
operating cycles so there is always enough cashflow to cover you. (Baker, 2009)”
After reviewing all of the necessary documentation as well as the countless meetings with the
executives, as the CFO my recommendations is to temporarily place the new product development on
hold because the company can utilize the funding that is being used for research, and development.
Meanwhile, we could outsource some of the work to contractors so that we can still focus on getting
these important factors taken care and still increase the cash flow. Outsourcing certain jobs to
companies that specialize is certain mission will allow the company to stay focused on what is
important to them. “You may choose to accept outsourcing at a loss where it involves a specialized
function or standby capacity. To evaluate savings, you must look closely at costs, to weigh costs before
and after outsourcing. You need to consider which costs will decrease, stay the same, or increase”
(Wiersema, 1999). In beliefs, this will allow the company to remain focused on keeping the company
open and continuing to make the stakeholders happy.
References
Baker, G. (2009). Bright ideas for cashflow control. NZ Business, 23(5), 36-41. Retrieved on September
20, 2012 from http://search.proquest.com/docview/204579458?accountid=12085
Wiersema, W. H. (1999). What does "outsourcing" mean; will it really save money?Electrical
Apparatus, 52(2), 42-44. Retrieved on September 20, 2012 from
http://search.proquest.com/docview/200450765? accountid=12085
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Thread:
Discussion Board 3
Post:
Discussion Board 3
Author:
Audrey Gobin
Posted Date:
September 19, 2012 10:11 PM
Status:
Published
Audrey Gobin
Managerial Finance, BUSI 530
Liberty University
When cash is king, companies need to make sure they have complete control over where their cash is
going in order to reduce cost. Learning to manage a financially flexible company is a strategic yet
important process that managers of firms must be able to handle. It is said that financially flexible firms
are often in less danger of becoming obsolete than firms that are inflexible. Assuming that I am a CFO of
a struggling firm that is not far from its dismiss due to the development of a new product that will not
be available until two years from now, deciding how to appropriate the sums of my cash flow would be
my first priority in helping to save the firm. By using the remaining cash flow from the firms operating
activities, my firm would be able to use the non-current assets for finding the expansion and the
repayment of long-term liabilities.
Fortunately in business the cash flow involves changes in levels of cash that a business has, and the
changes in the uses and sources of cash (Marzahn, 2006). Being that cash can derive from so many
sources when managing a firm that is minimal at best, borrowing from banking partners in exchange for
collateral would allow the firm to stay above water until the firms product is ready to be sold to the
public (Hawser, 2009). In order to keep the stakeholders happy, management would have to make it
their sole responsibility to keep the cash flowing at a steady rate at all times and to make sure that the
stockholders investments in the firm are not negatively affected. Also, out of respect of the company’s
stockholders information linked to the ordeal dealing with the product that will eventually revolutionize
the firm and the cost associated with that would be released.
References
Hawser, A. (2009). Cash is king again. Global Finance, 23(6), 37-37,40. Retrieved from
http://search.proquest.com/docview/198801605?accountid=12085
Marzahn, C. (2006, Cash is still king. RV Trade Digest, 26, 34-37. Retrieved from
http://search.proquest.com/docview/274699197?accountid=12085
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Thread:
Discussion Board 3- Odell
Bizzell Post:
Discussion Board 3- Odell Bizzell
Author:
Odell Bizzell
Posted Date:
September 19, 2012 8:23 PM
Status:
Published
Banking on the Future
When faced with tough times such as these executives have to make tough decisions that will ultimately
effect the direction of the company. The position of Chief Financial Officer offers a difficult challenge
when discussing a lack of cashflow and a looming closing of the company. The CFO’s core job is to
oversee the work of all the financial staff and be deeply involved in financial policy and financial
planning (Brealy, Myers, & Marcus, 2012). Therefore, when financial trouble occurs the CFO is in charge
of moving the company forward passed the issues so that the company can still thrive.
This brings us to our current situation. There is good news and there is bad news. The bad news is the
company has minimal cashflow, we are barely in the black and if nothing else changes the company will
be in the red in six months. However, the good news is that our product development team has
developed a product that will allow us to revolutionize the industry and upon obtaining adequate funds
to support and sustain our growth the company will be made whole again.
The key question that needs to be answered is: How will a struggling company obtain adequate
financing? The CFO’s challenge is getting investors and creditors to see the power in the new product
that we have in store for the public in two years. The plan laid out has to do with bringing in investment
funds through selling shares of stock and by getting a secured loan by placing some of our collateral on
hold.
Some may say why not get a regular bank loan or an unsecured line of credit. The way the economy is
at this time makes for a shortened supply of lenders giving credit even though there is a high demand of
individuals that want credit. Findings from Lemmon & Roberts (2010) report even show that large firms
with access to public credit markets are susceptible to the economy’s fluctuation in the supply of lender
capital. That being the case if we can offer some corporate assets as collateral and close a secured loan
to sustain and grow our current operations we will be in a better position.
Finally, there needs to be some sort of stock offering to the public. Since our company is already a public
company, what we can do is begin to get the media buzzing about our new product that will
undoubtedly revolutionize our industry. Financial statements are good to measure the value of a
company, but positive press also can be a factor as well. As soon as our stockholders and others get
wind of a revolutionary product releasing then our financial woes will begin to subside greatly. In order
to save the company we must bank on the future and move forward with what we believe will work.
References
Brealey, R. A., & Myers, S. C., & Marcus, A. J. (2011). Fundamentals of corporate finance with
Connect Plus (7th ed.). Boston, MA: McGraw-Hill. ISBN: 978-0-07-7596118.
Lemmon, M., & Roberts, M. R. (2010). The Response of corporate financing and investment to
changes in the supply of credit. Journal of Financial & Quantitative Analysis, 45(3), 555-
587. doi:10.1017/S0022109010000256
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