Important points - creditors finances, Finance Basics

Important Points - Creditors Finances

When by using creditor's finances a company must consider:

1. That cost of finance is less than the Return that implies the rate should not be less than the bank interest + inflation + risk.

2. Economic situation prevailing - need debt under boom situation.

3. Present gearing - whether high this will lead to:

4. Low credit rating

5. Lowering of the company's share prices particularly to less than Par value - this leads to mass sale of shares - producers rush to draw their finances and hence receivership.

6. Long term ventures have to identify for independent feasibility studies before funds are committed.

7. Assessment of the return - at least should be better than minimum return + risk + inflation.

8. Economic life - whether uncertain, the return ought to be higher.  That life must permit the company to pay off the loan.

The financial manager must be guided through principles of financial prudence i.e.

1. He has to consult experts.

2. He has to include investment committee

3. He has to ascertain where everyone included in the implementation of the venture has not been left out either within the implementation phase or planning phase.

Posted Date: 1/29/2013 12:47:24 AM | Location : United States







Related Discussions:- Important points - creditors finances, Assignment Help, Ask Question on Important points - creditors finances, Get Answer, Expert's Help, Important points - creditors finances Discussions

Write discussion on Important points - creditors finances
Your posts are moderated
Related Questions
$1,000 of insurance had not been used up by January 31. $325 of insurance had been used up in January

Agency Theory The agency problem between managers and shareholders can be resolved via paying high dividends. If retention is low, managers are necessary to increase additiona

Do your experts provide Future Value of Single or Multiple Cash Flows assignment help? I need urgent help in my college assignment.

Advantages of Residual Theory 1. Saving on floatation costs No require to raise debt or equity capital as there is high retention of earnings that necessitates no floatat

The Audiology Department at Randall Clinic offers many services to the clinic''s patients. The three most common , along with cost and utilization data, are as follows: Service Var

Importance of Working Capital Management The finance manager must understand the management of working capital since of the following purpose: a) Time devoted to working c

what are the difference between receipt and payment account and income and expenditure account ?

Tests of Term Structure of Interest Rates Theories Various tests have been conducted mainly in USA and they show that all the three (3) theories have some validity and therefo

a.  In the accompanying diagram (which represents the market for chocolate candy bars), the initial equilibrium is at the intersection of S1 and D1. Circle the new equilibrium if t

what is cash budgeting and what is it used for