MOST Analysis

Mission Statement

The mission of the Capital Structure Workshop at Appleton Greene is to estimate capital needs effectively, considering both fixed capital requirements and working capital needs. The primary objective is to prevent over-capitalization or under-capitalization, ensuring optimal financial structure.

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Objectives

01. Introduction to Capital Estimation: Conduct departmental SWOT analysis; Engage in strategy research & development. Time Allocated: 1 Month
02. Types of Capital in Business: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. Fixed Capital Requirements: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Working Capital Components: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Forecasting Sales and Expenses: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Cash Flow Analysis: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Risk Assessment in Capital Estimation: departmental SWOT analysis; strategy research & development. 1 Month
08. Financial Ratios and Metrics: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Sources of Capital: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
10. Capital Estimation Tools and Software: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
11. Case Studies in Capital Estimation: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
12. Building a Comprehensive Capital Estimation Strategy: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month

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Strategies

01. Introduction to Capital Estimation: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. Types of Capital in Business: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. Fixed Capital Requirements: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Working Capital Components: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Forecasting Sales and Expenses: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Cash Flow Analysis: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Risk Assessment in Capital Estimation: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. Financial Ratios and Metrics: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Sources of Capital: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
10. Capital Estimation Tools and Software: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
11. Case Studies in Capital Estimation: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
12. Building a Comprehensive Capital Estimation Strategy: Each individual department head to undertake departmental SWOT analysis; strategy research & development.

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Tasks

01. Create a task on your calendar, to be completed within the next month, to analyse Introduction to Capital Estimation.
02. Create a task on your calendar, to be completed within the next month, to analyse Types of Capital in Business.
03. Create a task on your calendar, to be completed within the next month, to analyse Fixed Capital Requirements.
04. Create a task on your calendar, to be completed within the next month, to analyse Working Capital Components.
05. Create a task on your calendar, to be completed within the next month, to analyze Forecasting Sales and Expenses.
06. Create a task on your calendar, to be completed within the next month, to analyse Cash Flow Analysis.
07. Create a task on your calendar, to be completed within the next month, to analyse Risk Assessment in Capital Estimation.
08. Create a task on your calendar, to be completed within the next month, to analyse Financial Ratios and Metrics.
09. Create a task on your calendar, to be completed within the next month, to analyze Sources of Capital.
10. Create a task on your calendar, to be completed within the next month, to analyse Capital Estimation Tools and Software.
11. Create a task on your calendar, to be completed within the next month, to analyse Case Studies in Capital Estimation.
12. Create a task on your calendar, to be completed within the next month, to analyse Building a Comprehensive Capital Estimation Strategy.

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Introduction

What is Financial Management?

Planning, arranging, managing, and regulating financial operations, such as acquiring and using company funds, is known as financial management. It entails utilizing the enterprise’s financial resources in accordance with general management principles.

What Finance Is and What It Does

Finance encompasses several key aspects crucial for the effective management of resources within a business. Capital budgeting, or investment decisions, involves allocating funds towards fixed assets and considering working capital needs by investing in current assets. Financial decisions, on the other hand, revolve around securing funding from diverse sources, necessitating choices regarding the type, duration, cost, and resulting profits of the financing. Additionally, the finance manager faces the dividend decision, which involves determining how to distribute net profits. This typically involves allocating profits into dividends for shareholders, with considerations for the dividend rate, and retained earnings, which depend on the company’s growth and diversification objectives.

Objectives of Financial Management

Financial management primarily revolves around the acquisition, allocation, and regulation of financial resources within an organization, aiming to achieve several key objectives. Firstly, it seeks to ensure a consistent and ample flow of funding to sustain the organization’s operations. Secondly, it aims to generate sufficient profits for investors, contingent upon their expectations, market valuation of shares, and earning potential. Thirdly, financial management strives for the optimal utilization of finances, emphasizing cost-effectiveness and efficiency in expenditure. Additionally, it emphasizes the importance of investment safety, advocating for the allocation of funds into secure ventures capable of yielding satisfactory returns. Finally, it emphasizes the establishment of a stable capital structure, maintaining a balance between debt and equity capital to ensure a healthy and equitable composition of capital for sustained growth and stability.

Functions of Financial Management

Financial management encompasses a multitude of critical functions that are imperative for the effective operation and growth of an organization. Firstly, the finance manager undertakes the assessment of capital requirements, meticulously evaluating projected profits, expenses, and future strategic initiatives to ascertain the necessary capital for supporting the company’s earning potential. Subsequently, the determination of the capital composition ensues, involving a comprehensive analysis of both short-term and long-term debt options based on the desired capital structure and funding needs. Identifying suitable financing sources constitutes another vital function, with considerations spanning from issuing shares and debentures to securing loans from financial institutions or drawing public deposits like bonds, weighed against the advantages, disadvantages, and financing periods of each option. Following this, judicious investment of funds is paramount to ensure both investment safety and regular returns, necessitating astute decisions on funding profitable ventures.

Moreover, the finance manager is tasked with disposing of surplus funds, contemplating between declaring dividends, including decisions on dividend amounts and potential bonuses, and retaining earnings, aligning with the organization’s expansion, innovation, and diversification plans. Cash management emerges as a crucial aspect wherein the finance manager must allocate funds for various purposes such as payroll, utility bills, creditor payments, debt servicing, inventory maintenance, and procurement of raw materials, ensuring adequate liquidity for seamless operations. Lastly, financial controls are implemented to oversee the acquisition, allocation, and utilization of reserves, employing diverse strategies like ratio analysis, financial forecasting, and cost-benefit analysis to maintain effective command over funds and uphold financial stability and growth. Through the meticulous execution of these functions, financial management plays a pivotal role in steering organizations towards prosperity and sustainability in an increasingly dynamic business landscape.

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Role of Finance Manger

Finance Manager play various function that can be divided into two broad functions including managerial/executive functions and Routine Functions:

Managerial Functions:

Estimating capital requirements

The Company must carefully estimate its capital requirements or needs. Often, this is done at its promotional stage. This involve estimation of the company’s fixed capital requirements as well as working capital requirements. If estimation of capital requirement is not done, problems such as undercapitalization or overcapitalization may occur.

Determining capital structure

Capital structure is defined as the proportion of debt and equity in the company’s total capital. A company must maintain a balance between the level of debt and owned capital. Too much owned capital held by the company implies that the shareholders will get low dividends, however, too much debt or borrowed capital results in the company paying a lot of interest reducing the company profits. Additionally, the company has to pay the borrowed capital after a certain period of time. Therefore, finance manager must always ensure that the company has a balanced capital structure.

Estimating cash flow

Cash flow refers to the cash which comes in and the cash which goes out of the business. The cash comes in mostly from sales. The cash goes out for business expenses. So, the finance manager must estimate the future sales of the business. This is called Sales forecasting. He also has to estimate the future business expenses.

Investment Decisions

The business gets cash, mainly from sales. It also gets cash from other sources. It gets long-term cash from equity shares, debentures, term loans from financial institutions, etc. It gets short-term loans from banks, fixed deposits, dealer deposits, etc. The finance manager must invest the cash properly. Long-term cash must be used for purchasing fixed assets. Short-term cash must be used as a working capital.

Allocation of surplus

Surplus means profits earned by the company. When the company has a surplus, it has three options, viz.

It can pay dividend to shareholders.

It c