Finance in Corporate America

1850 Words Sep 11th, 2011 8 Pages
Joanne Jackson
June 1, 2011
Corporate Finance 620
M 600-950
Ch. 12 Mini Case

A. Do you think Adam Lee should develop a strategic plan for the company? Why? What are the central elements of such a plan? What is the role of finance in a strategic plan?

Yes. The goal of companies is to create more wealth for the owners and for financial managers to make their company more valuable and without well designed strategic and tactical plans in place it is impossible to do. The central elements of a strategic plan are: (1) statement for mission (2) corporate scope (3) corporate objectives (4) strategies (5) the operating plan and (5) the financial plan.

The role of finance in a strategic plan is to add more
…show more content…
E. Define the term self-supporting growth rate.

The self-supporting growth rate is the maximum growth rate that a firm can achieve if it had no access to external capital.

Based on the Figure MC-1 data, what is Hatfield’s self-supporting growth rate? Would the self-supporting growth rate be affected by a change in the capital intensity ratio or the other factors mentioned in question d? M (1 – POR)(S0) 0.012(1 – 0.675)(2,000) Self-supporting g = = A0 * - L0* - M(1 – POR)(S0) 1,200 – 100 – 0.012(1 – 0.675)(2,000) $7.8 = = 0.7% $1,092.32 The self-supporting growth rate would be affected by a change in capital intensity because if the capital intensity ratio is high then the lower the self-supporting growth rate will be because the company would need more assets for each dollar of sales they have. The higher the profit margin the higher the self-supporting growth rate because the need for external financing would be low because the company would be able to support the increase in assets. The lower the payout ratio the higher the higher the self-supporting growth rate because the company is holding more

More about Finance in Corporate America

Open Document