Technological University of the Philippines

College of Liberal Arts

Strategic Management
MGT.4

Chapter 11 / Group 11

Financial Strategy

BSEnM-3B
Submitted by:
Panotes, Wendy
Caranto, Rozzelle Anne C.
Yson, Camille N.
Aquitar, Judy Mark
Tablatin, Rochelle

Chapter 10/ Group 10

Financial Strategy

I.

II.

Objectives

To be able to discussed Capital structure of the firm

To know about the best possible use of financial resources

How to maximize the market valuation of the firm
Elaborate the Gearing of firm

Learning Conten

III. Summary/ Generalization

A financing strategy is integral to an organisations strategic plan. It sets out
how the organisation plans to finance its overall operations to meet its
objectives now and in the future. A financing strategy summarises targets,
and the actions to be taken over a three to five year period to achieve the
targets. It also clearly states key policies which will guide those actions.
Capital structure describes how a corporation finances its assets. Capital
structure is what describes the relationship of these financing sources as they
appear on the corporations balance sheet. Examples of capital sources that
may be included in a corporations capital structure are: Working Capital,
Equity, Senior Debt, Mezzanine Debt, Alternatives. Gearing is a measure of a
companys financial leverage and shows the extent to which its operations are
funded by lenders versus shareholders. Finance is necessary to bridge the
gap. The source of business finance should be related to the purpose for
which it is required. Long-term financing is generally for assets and projects
and

short

term

financing

is

typically

for

continuing

operations.

Undercapitalization tends to choose high-cost sources of capital, such as

short-term credit, over lower-cost forms such as equity or long-term
debt. Financial dilution involves mainly earnings per share (EPS), as current
low dividends make dividend per share less significant and as net asset value
is relevant only for holding companies, real-estate trusts and conglomerates.
Issued shares define as law and finance for the quantity of shares of a
corporation, which have been allocated and are subsequently held by
shareholders. Scrip issue is an issue of additional shares to shareholders in
proportion to the shares already held.
Source of Funds: Personal savings
Family and friends
Banks
Finance companies
Venture capitalists
Angels

IV.

I.

Post Test

Discussion. Write the correct answer.

_______________1.) Also called bonus issues. Is a free issues of shares to existing shareholders to
account for the increase in the valuate of the company that has occurred in consequences of its
ploughing back large parts of its profits into land and machinery etc.
_______________2.) Is the opposite of share dilution.
_______________3.) Also known as over capitalization can result from additional shares being
issued to finance acquisition.
_______________4.) This is also known as the gearing of the business.
_______________5.)

II.

Enumeration
1-3. Give at least 3 example of Short Term Financing resources
4-5. 2 types of Finance
6-10

V.

References:

VI.