Financing Corporate Growth

Make try

FINANCING CORPORATE GROWTH
By Bradford Cornell, University of California, Los Angeles, and Alan C. Shapiro, University of Southern California
Rapid bourgeoning poses special problems for financial managers. They fust raise large amounts of cash to supply this growth, often for risky and relatively young firms. Nonetheless, it is misleading to declare of “financial management for growing companies” considered in the state of if it were a special subject unrelated to financial management in general. The ultimate goal of financial policy, whether a company is extending or not, is to maximize the set a high ~ on of shareholders’ equity. In addition, the determine of financial instruments and policies available to a financial manager does not vary just because a company is extending rapidly. It makes sense, therefore, to interrogate the financial tools available to wholly firms to boost market value control talking about the appropriate financial strategies during growing firms.

Broadly speaking, there are pair basic approaches for using finance to enlarge the value of the firm. Both these approaches be possible to be illustrated by thinking of the resolute as producing a cash flow “pie” — that is, full operating cash flow distributable to whole investors (debtholders, stockholders, and others). The at the outset approach takes the size of the specie flow pie to be independent of monetary policy, so that the principal role of finance is to divide the pie into slices ~ the agency of issuing varying types of securities. The correlate of this division is to suit the securities’ characteristics with the desires of investors with equal rea~n as to maximize the total avails from the sale of the securities. The assist approach focuses on ways in that financial policy can increase the greatness of the value pie by touching operating and investment decisions. Underlying this bring near is the view that a gathering is a complex web of “contracts” tying contemporaneously disparate corporate stakeholders such as investors, administration, employees, customers, suppliers, and distributors. This be nearly equal...

Continues for 38 more pages »

Read filled document

Full access is free for registered users.

Add to Library  (0) Hide

Do effort