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金融通常被称为是所有组织的生命线,而且通常供应有限。按财务管理的说法,现金是最宝贵的资源,且需要进行有效的管理。寻求金融的行为的重要性不能被过分强调,否则很可能导致像经营活动减缓或破产那样的结果。
向大公司提供融资渠道的途径有多种,但这些来源大致可分为两类(即债务和股权融资)。公司在长期或短期的基础上可能使用外部或内部的来源。短期融资是在这个任务的范围之外。
传统意义上,企业的存在就是去获取利润。但这个概念是相当狭窄和主观的,尤其当利润并不能保证他们的生存和所有利益相关者的利益。公司接下来试图去实现什么?这就是“股东财富最大化”,通常被认为是公司的目标。(Ross, Westerfield & Jordan 2003)
高效的财务管理总是在寻求这样的目标——为股东增加价值并满足所有利益相关者[1]。这种观点强调的是股东作为所有者承担最高风险和利益排名底部,就是在其他利益相关者都得到好处后才轮到他们的事实。那也就是说,他们获得的是剩下的东西。亚当密斯(1776)是最早假设这一观点的人;“商人…通过追求他自己的利益,往往比他真正出于本意的情况下更有效地去保护社会”
大型公司的目的是什么-What Is The Purpose Of Large Firms
Finance is commonly referred to as the life wire of any organization and usually in limited supply. In the parlance of financial management, cash is the most valuable resource and needs to be efficiently managed. The importance of sourcing for finance cannot be over emphasized as lack of it may well result to slow down of operational activities and possible bankruptcy.
There are various sources of finance available to large companies but these sources can be broadly classified into two (that is, debt and equity finance). Firms may use external or internal sources on a long-term or short term basis. The short term financing are outside the scope of this assignment.
Traditionally, companies exist to make profit but this concept is quite narrow and subjective as profit alone does not ensure their survival and interest of all stakeholders. What then do firms try to achieve? That is “maximizing shareholders wealth” which is generally regarded as the objective of firms. (Ross, Westerfield & Jordan 2003)
Efficient Financial Management always seek to achieve this goal as there is a direct co-relation between adding value to shareholders and meeting the needs of all stakeholders [1] . This view is highlighted by the fact that shareholders as owners bear the highest risk and rank at the bottom to receive benefits after other stakeholders. That is to say, they get the left-over. Adams Smith (1776) was one of the earliest to postulate this view; ‘the business man…by pursuing his own interests, frequently promotes that of the society more effectually than when he really intends to protect it’
Also Al Ehrbar (1998) establishes that, in trying to satisfy the selfish interest of one group (in this case, the shareholders), we end up meeting those of other stakeholder. This is the case as we go down the ranking order to equity holders.
Usually, owners of companies (shareholders) appoint/hire managers (agents) to carry on the business of managing their interest (that is value maximization). This agent-ownership relationship is referred to as the “agency theory”. Most often than not, there exist conflict of interest as some agents or managers(whom I wish to describe as damaging directors, in the light of recent collapse of high profile companies) seek to pursue goals other than the owners. Some of these goals are personal and involve engaging in risky decisions to achieve high bonuses. The Agency Theory or recently Corporate Governance issues tend to negate the over all firm objective of maximizing shareholders wealth.
To ensure that agents do what they are hired to do and to improve on Corporate Governance, several code of conducts(modus-operandi) have been put in place by regulatory bodies through the Sarbanes-Oxley Act(USA), Hermes Fund Managers, Cadbury Report etc.
(University of Sunderland Business School APC 308 Financial Management 2007, pp 19-20)
For companies to achieve their over all objective, they must critically evaluate the Capital Structure, Cost of Capital and conduct Project Appraisal for all competing investment decisions. These key issues do not operate in isolation as they are also directly linked with sourcing for and efficient management of finance in terms of associated risks.
This essay is in two parts: A and B, and defines the scope. Part A – covers the “importance of capital structure and cost of capital” and part B – will dwell on the “models of appraising investments”.
(A)部分-PART (A)
资本成本-COST OF CAPITAL
This is simply the minimum expected rate of return to the providers of finance. When viewed from the company’s perspective this rate is a cost. In order to ensure the efficient management of finance, ascertaining the least possible cost of capital is very pertinent. The rule of thumb here is that for every source of finance available to a company, there is always an associated cost implication. It is also note worthy to mention that there is some relationship between the cost of capital, capital structure and most importantly appraising projects. The expected rate of return (otherwise discount rate) is used to test the viability of projects for investment decisions. This point will be evaluated in part B.
In estimating the cost of capital the time value of money with the risk factor and opportunity cost are considered. A higher risk implies a higher returns (or cost).
Basically, the company’s cost of capital is the Weighted Average Cost of Capital (WACC) and comprises the average costs of all the firms’ sources of finance (that is, cost of debt and equity financing).
Cost of Equity: This is the estimated returns a shareholder expects from investing in a company. Equity owners or shareholders are the owners of the company and enjoy the rights to vote, appoint directors, receive dividend and share in any residual asset. But also bear the highest loss in the event of a receivership.
Estimating this cost involves two approaches: the dividend valuation model and the capital asset pricing model
Dividend Valuation Model(DVM): this model is predicated on the assumption that the share price is the value of the future dividends discounted to today’s value
The expression used for estimating this cost is;
Ke = Di / Po + g
Where, Ke = cost of capital, Di = next year’s dividend
Po = current share price and g = annual dividend growth rate.
This approach relies heavily on the historical data which is readily available and requires little effort to estimate. This is its major advantage (simplicity). On the other hand, the dividend valuation model has a number of short comings, most noticeable is it applies only to firms that pay dividend and this is often not the case. In reality companies may not be making sufficient profit to pay dividend or have it retained. The model also assumes a constant growth rate. Share prices are highly volatile and not very reliable to base predictions. Furthermore, it plays down the risk factor assuming that share prices exist in an efficient capital market. This last assumption is a subject of debate as there is implicit risk associated with the use of current share price in its computation. (Ross, Westerfield & Jordan 2003, pg 497)
Capital Asset Pricing Model (CAPM): this is a more suitable approach to estimate the cost of equity than the dividend valuation model as risk is core element. It is a mathematical model that estimates the return expected from an asset (security) relative to the security risk (referred to as the beta).
It is expressed by the Security Market Line (SML) and a derivative of the Portfolio Theory. The Portfolio Theory seeks out the best possible mix or combination of assets that will compensate the risk associated with individual security in a portfolio by spreading the risk across board.
That is, the diversification of investments (Markowitz 1952). This is a key role of financial management and demonstrates good stewardship.
The risk elements are of two types: Systematic Risk [2] and Unsystematic Risk [3]
The SML is a line graph which indicates the relationship between the risk (beta) and the expected returns. This line also highlights the Risk Premium (which is the incentive for an investor accommodating extra risk, in the form of an opportunity cost for not investing in a low risk security).
This model estimates the expected return using the expression:
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