Corporate Finance

Running Head: CORPORATE FINANCE
CORPORATE FINANCE

Running Head: CORPORATE FINANCE
Contents
Part 1: Company Financing........................................................................................................3
Question 1...............................................................................................................................3
Question 2...............................................................................................................................3
Question 3...............................................................................................................................3
Question 4...............................................................................................................................4
Question 5...............................................................................................................................4
Question 6...............................................................................................................................5
Question 7...............................................................................................................................5
Part 2: Capital Budgeting...........................................................................................................5
Question 1...............................................................................................................................5
Question 2...............................................................................................................................5
Question 3...............................................................................................................................5
Question 4...............................................................................................................................6
Question 5...............................................................................................................................6
Part 3: Personal Reflection.........................................................................................................6
References..................................................................................................................................7

Running Head: CORPORATE FINANCE
Part 1: Company Financing
Question 1
Amazon’s cash conversion cycle in the financial year 2014 in comparison to the other
retailers is negative and it determines that the revenue is generated by Amazon before it can
pay back to the suppliers. It is an interest free method of financing operation while borrowing
funds from the suppliers. In comparison to other retailers like Wal-Mart the cash conversion
cycle is 2 days. The working capital management of Amazon is sound and smooth (Walmart,
2019).
Question 2
The negative cycle is important for a company wanting to experiment with the new products
as the companies requires cash in hand to invest in the new business. Further, the negative
cash conversion cycle displays that the company is its own bank yet an operating credit line is
necessary (Molla, 2019).
Question 3
The financing options that are available to Amazon if the cash is not utilised is the by the way
of public offering through shares or the long term debt from either banks or other financial
institutions.
The advantage of financing through equity is that there is less risk as the monthly instalment
is not required to be paid, the credit problems can be solved and moreover the funds will not
be flowing out of the business.
The advantage of the debt financing is that once the long term borrowing is acquired the
relationship can cease as and when the repayment is done. The interest on loan is supported