Сборник бизнес-кейсов алматы, 2015 Выпуск 1
How would you describe the Bank’s financial policy: conservative or aggressive? What
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| 3. How would you describe the Bank’s financial policy: conservative or aggressive? What
happens if you attract long-term loans and which ones? Within the third question, it may be useful to use Figure 2 for explanation of the differences between company’s conservative and aggressive financial policies. Figure 2: Sources of funding Assets &Funding sources Variable part of current assets Short-term funding Permanent part of current assets Long-term Fixed funding assets time Explanation for the Figure 2 could be the following: The permanent part of current assets is the minimum needed to carry out enterprise’s operating activity and its value does not depend on seasonal fluctuations in output and sales. As a rule, this part is fully financed by equity capital and long-term borrowings. The variable part of current assets is subject to fluctuations due to seasonal change in the company’s activity. Usually it is financed by short-term borrowed capital as well as in a conservative approach - partially by equity. You could show in the Figure 2, how to distinguish between two basic types of financial policy. A conservative financial policy is the behavior when a company uses long-term financing to cover a part of current assets. The higher the line of long-term financing on the graph, the more conservative will be the financial policy of the company, and costs will be higher. An aggressive financial policy is the opposite of a conservative one. In this case, a company’s 75 permanent current assets are financed by short-term loans. As a result there could be a negative effect of collateral for loans and a constant need to refinance its loans by the end of the period, which could lead to additional risks. Here it would be appropriate to engage students into a discussion with the question: "To what type of financial policy could you attribute Darithana’s policy? What are the additional risks of short-term financing? How is it possible to reduce these risks?" Most likely, the students would say that the company’s policy was aggressive as Darithana currently had to look for other sources of short-term financing to repay the two urgent liabilities. Among the possible additional risks of short-term financing students may include the following: (1) The shorter period of payments on a schedule, the greater the risk that a company would not be able to loan repayments and interests on them. (2) Cash flows from fixed assets erected due to short-term financing are likely to be insufficient for the return of loans and there would be a risk that a creditor refuses to prolong maturity of a loan. (3) In the short-term lending there could be a high risk associated with increasing interest rates on subsequent loans. (4) When you refinance short-term loans during the period of rising interest rates, the amount of interest paid might be greater than service payments of long-term loans. If you are extending the case, this is an ideal point to bring up the next question: “How could we maintain the necessary level of collateral for a loan?” Possible student responses could be the following: (1) by increasing the proportion of liquid assets, which could reduce risks of insolvency; (2) by requesting the Bank to change or extend the maturity schedule. жүктеу/скачать 3.48 Mb. Достарыңызбен бөлісу:
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