Day_28_-_FinExp_(Debt)[1]

Day_28_-_FinExp_(Debt)[1] - Financing Expansion Debt Day 28...

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Financing Expansion - Debt Day 28
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First, some background on  financial management … The key activities of the financial manager are: Financial planning Investments (spending money) Financing (raising money) The goal of the financial manager is: to maximize the value of the firm to its owners  (i.e., to maximize shareholder value = SHV)
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Now, for the topic of the day… Financing Expansion - Debt Marketing indicates that more bikes can be sold… Operations Management indicates that the factory is  already operating at capacity, and that an  investment in additional capacity should be  made… The investment in long-lived assets like machinery  and buildings is called capital expenditures . So where will the funds (capital) come from?
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The analysis… 1. What is the firm’s current available cash? 2. How much does the firm need for its current  operations? 3. What are the projected additional revenues and  expenses (i.e., sales, COGS, selling expense,  etc)? 4. What are the firm’s expansion plans? 5. Finally, project your firm’s total cash needs, and  additional funds required.
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External financing When the firm is unable to fund growth internally , outside  investors are needed.  There are two sources of external  financing: Debt  (financing provided by lenders/creditors i.e. borrowing)  
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