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Describe the factors affecting the option of a minimum cash balance amount. The minimum cash balance amount is find out by how easy it is to increase funds when needed, how predictable the cash flows
Describe primary reasons that companies hold cash? Companies hold cash to make essential payments, to take benefit of opportunities as they arise, and to cover unforeseen emergencies.
Describe most conservative type of working capital financing plan a company could implement? clarify. An all equity capital structure would be the most conservative kind of working capital financing
Describe the advantages and disadvantages of the aggressive working capital financing approach? An aggressive working capital financing approach generally results in a lower cost of funds for a firm h
Describe matching principle of working capital financing? Explain the benefits of following this principle? The matching principle is while short-term financing is utilized for temporary current asse
Describe risks related with using a large amount of short-term financing for working capital? By using a large amount of short-term financing usually allows funds to be raised at a lower cost however
Describe how a firm find out the optimal level of current assets. The optimal level of working capital is finding out by determining the amount that balances the requirement for liquidity and for prof
Can a corporation contain too much working capital? Describe. A firm can contain too much working capital if this is losing the chance to invest in high returning fixed assets and if this goes beyond
Explain the primary advantage to a corporation of investing some of its funds within working capital? Through investing in working capital a firm gets the liquidity it require helping it to pay its bi
Describe working capital? Working capital contains the current assets of the firm.
Describe the effect of stock (not cash) dividends and stock splits onto the market price of common stock? Why do corporations state stock splits and stock dividends? Stock splits & stock dividend
Describe the bird in the hand theory of cash dividends. The bird in the hand dividends theory says that dividends attained now are better than a promise of future dividends. Uncertainty is resolved w
Do you trust an increased common stock cash dividend can send any signal to the common stockholders? If so, what signal might it send? An increase in cash dividends is frequently seen as a positive s
Describe Modigliani and Miller theory of dividends? Describe. The Modigliani-Miller theory of dividends says which dividend theory is irrelevant. They claim that it is the income generated by assets
Describe some factors which common stockholders consider while deciding how much, if any, cash dividends they want from the corporation wherein they have invested? Common stockholders would assume the
Are there any legal factors which could restrict a corporation in its attempt to pay cash dividends to common stockholders? Describe. A firm may be legally limited as to the dividends it can pay thro
Describe the role of cash and of earnings while a corporation is deciding how much, if any, cash dividends to pay to common stockholders. In the long-run earnings are essential to maintain dividend pa
Under what conditions is a warrant's value high? Describe. A warrant's value would be great when the stock price, time to expiration, and/or expected stock price volatility is great.
Describe why warrants are hardly ever exercised unless the time to maturity is small? Warrants are hardly ever exercised until the time to expiration is small since the market price of the warrant is
How does a preemptive right secure the interests of present stockholders? A preemptive right secure the interests of existing stockholders through giving them the chance to preempt other investors int
What does an investment banker do while underwriting a new security issue for any corporation? While underwriting a new security issue an investment banker purchase it and after that resells it to inv
Describe advantages and the disadvantages of new stock issue? A new stock issue increase funds and decreases the riskiness of the firm. This also tends to send a negative signal to the market as many
How are the members of the board of directors of corporation selected and to whom do these board members owe their prime allegiance? Members of corporation's board of directors are chosen by the commo
Describe some of the government requirements imposed onto a public corporation which are not imposed on a private, intimately held corporation? Public corporations ought to submit audited financial st
If an optimal capital structure exists, describe reasons why too little debt is as unwanted as is too much debt? Too little debt may be as unwanted as too much debt since if a firm contains a very con