1. - UGC estimated that it would need C$150 million to carry out its strategic plans over the coming two years. Will its internal resources provide reliable funding for this program? How much external funding might it need?
After carefully reviewing the income statement, balances sheet and cash flow it seems that the company has a negative cash flow for 1998, so even before thinking about obtaining internal and external resources for long term investment, the company must assure resources for their own working capital.
This seems not logical or correct, because the secularization is meant for the company to raise cash by selling accounts receivables and reducing inventory, but for…show more content… What elements of the business (examples: revenues, investment needs, etc.) might be affected by weather risk or environmental liability, and how?
First I would categorized them in 3 different groups, business related, political and environmental, but is very important to mention that in some cases a single risk can be categorize in more than one group, for example, that is the case of the weather risk that I consider in the environmental group but it has a direct impact in the business related group.
The second step is to determine if the risk are from human nature or from natural causes, if they are from human nature it is important to find out if there are any ways to eliminate or at least mitigate the risk and if the company can do it what would be the cost.
At the end all the risk are finance related, because the liability’s cost money and this will have an effect in the company’s earnings, so what is important is not only to try to avoid such events but also to be prepare in case they happen and have a plan, is like the saying “Hope for the best but be prepare for the worst”.
3. - Why should UGG (or any other firm) worry about risks if investors can diversify? a) What would be the answer of the Miller & Modigliani model in a perfect world? What are the possible imperfections that may affect this answer?
The problem is the Canadian regulation, this is because the law specifies that the Board of Directors and the Manager of the Company are responsible