1664 JALAN KULIM 14202 BUKIT MERTAJAM PENANG TEL 012 5203212 0125113212 04

1664 jalan kulim 14202 bukit mertajam penang tel 012

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1664, JALAN KULIM, 14202 BUKIT MERTAJAM, PENANG TEL : 012-5203212 / 0125113212 / 04-5512588 Subject: Financial Management (DFM1) Prepared by: Susan Lim Email : [email protected] Investment Decisions (1) Businesses are exposed to a very competitive environment, its important that opportunities are identified and investment in made in order for a firm to reap its benefits. (2) The important issues such as the risk and return involved. (3) Every investment comes with certain degree of risk level, the understanding and achieved a balance between risk and return. (4) Example of different types of investment decision: Decisions internal to the business enterprise Whether to undertake new projects Whether to invest in new plant and machinery Research and development decisions Investment in a marketing or advertising campaign Decisions involving external parties Whether to carry out a takeover or a merger involving another business Whether to engage in a joint venture with another enterprise Disinvestment decisions Whether to sell off unprofitable segments of the business Whether to sell old or surplus plant and machinery The sale of subsidiary companies
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___________________________________________________________________________________________________________________ Page 4 of 19 IPK COLLEGE 1664, JALAN KULIM, 14202 BUKIT MERTAJAM, PENANG TEL : 012-5203212 / 0125113212 / 04-5512588 Subject: Financial Management (DFM1) Prepared by: Susan Lim Email : [email protected] Financing Decisions (1) Determining what sources of funds should be obtained . (2) Assessing the effect of using different methods of short and long term finance on the Company’s value and profitabi lity (3) Decision to acquire optimum finance to meet financial objectives (4) Objectives to minimise the cost of finance (5) Financing can be raised from 2 major source :debt and equity (6) Factors to be considered before choosing the method of financing. These factors include cost of financing, risk level, the cost of issue, amount and also repayment period. Debt financing Maybe a preferred choice because if its simplicity of issue, there is always the danger of repayment period. Firms need to ensure that they are able to refinance ant repayment of the loan that they have made as inability to pay may result in liquidation. Cost of interest would also be taken into account coupled with the level of gearing a company is having before and after the issue of debt financial. Gearing would give a clearer indications about the financial risk of a company and this would help managers to make a better and well informed decision Equity financing When large sum of financing is needed generally equity financing is the preferred choice for investors. The company can be rest assured that equity financing is a long term financing as there is no expected repayment to be worried about thus this can facilitate company have a more detailed and long term financing planning. There are also issues such as fluctuations in share price, dividend payments and also controlling interest to be considered.
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___________________________________________________________________________________________________________________ Page 5 of 19 IPK COLLEGE 1664, JALAN KULIM, 14202 BUKIT MERTAJAM, PENANG TEL : 012-5203212 / 0125113212 / 04-5512588
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  • Spring '17
  • JANE KDAL

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