Effective strategies are crucial to the well-being of the firm, and need to address the following issues:
- How, where and when the business will obtain funds, plus (for public companies) the timing of share issues and the determination of share issue prices
- The best use of financial resources
- Gearing
- How to maximize the market valuation of the firm
- What to do with accumulated cash
- Long term financial planning for business expansion
- The capital structure of the business
- The extent to which internally generated profits are reinvested within the company
- Choice of financial criteria for selecting major capital investments.
Also companies operating in several countries need to formulate
strategies and policies for dealing with the risks associated with exchange rate fluctuations, the management of long-term financial investment, and the cross-border administration of working capital and liquidity. Manufacturing business in particular have to plan the purchase of large amounts of raw materials, components and capital equipment, frequently sourced from abroad.
strategies and policies for dealing with the risks associated with exchange rate fluctuations, the management of long-term financial investment, and the cross-border administration of working capital and liquidity. Manufacturing business in particular have to plan the purchase of large amounts of raw materials, components and capital equipment, frequently sourced from abroad.
Successful implementation of financial strategies will enable the firm to:
- replace capital assets when necessary
- cover loan and debenture interest as the falls due and repay the capital on maturity
- build up sufficient reserves to meet contingencies
- facilitate steady long-term growth
- ensure that funds are available at the right time and the lowest cost.
