Structure And Capital Management Policy

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structure and capital budgeting. In the working capital management policy, the finance manager will manage the levels of current assets (cash, inventory, accounts receivables, etc.) and current liabilities (accounts payables, taxes payables, etc.). Several techniques such as the Cash Conversion Cycle, Economic Order Quantity and others can be used. In the capital structure policy, the finance manager will raise the capital through debt and/or equity. It is worth noting that each financing option comes with advantages and disadvantages. For example, the debt (Loans or Bonds) comes with a tax advantage (on the interest expense) but also increases the risk of financial distress (bankruptcy). When selecting the optimal capital structure, the finance manager will consider factors such as the risk tolerance, the ability to access equity markets, the ability to take advantage of the tax write off and others. In the capital budgeting policy, the finance manager will select the most financially viable projects for the firm. The firm may look into expansion projects or cost saving projects. Several techniques such as the Net Present Value (NPV), Internal Rate of Return (IRR) and others are used in capital budgeting. Multinational Companies (MNCs) operate across borders for different reasons such as business opportunities, economies of scale, lower labor costs and others. When operating internationally, the finance manager will now have to deal with more considerations: • The political
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