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Strategic Financial Management

   

Added on  2020-02-03

9 Pages2684 Words57 Views
Financial strategy - 21

Table of ContentsINTRODUCTION ...............................................................................................................................3TASK 1.................................................................................................................................................3Appraisal of GDF Suez's capital structure.......................................................................................3Critically evaluate theoretical advantage and disadvantages of GDF Suez's capital structure........4TASK 2 ................................................................................................................................................5GDF Suez's short-term financing perspective ................................................................................5Critical evaluation of potential advantage and disadvantage of GDF Suez's financial strategy......6CONCLUSION....................................................................................................................................7References............................................................................................................................................82

INTRODUCTION Strategic financial management is regarded as the process of managing and administratingfinancial business activities to accomplish organizational targets. It refers to long-term corporateplanning through which manager can determine their financial requirement and employ varioussources to meet their capital need at minimum cost. Now-a-days, it becomes important for thecorporations to gather funds for both the long-term and short-term period. Henceforth, financialmanager has to determine an optimum mix of capital structure through the composition of both thedebt and equity. Furthermore, they also have responsibility to manage sufficient amount of workingcapital in order to pay their routine expenditures and run operations without any hurdles. Thepresent project report herewith emphasizes on evaluation of capital structure and short-termfinancing strategies that GDF SUEZ employ in their business practice. TASK 1Appraisal of GDF Suez's capital structureGDF SUEZ is a global organization which provides electricity, natural gas and energyservices to large number of consumers. Currently, its name has been changed to “Engine” to reflectan evolving energy distributor company in order to move towards less centralised and less carbon-intensive system. Being operation in energy sector, it requires huge amount of long-term capital tomeet their requirement (Braveman, 2016). With reference to GDF SUEZ, in 2013, total long-term borrowing was €28576m got improved to €28024m in 2014. However, on the other hand, totalequity capital employed in the business has been increased from €47971m to €49527m. It reflectsthat in 2014, GDF SUEZ paid its borrowings worth €552m whereas entrepreneur issued sharecapital worth €1556m in this year. Debt/equity ratio is a measure of financial leverage that indicatesthat what portion of the capital is financed through equity and debt sources, calculated here asunder: Year20132014Debt2857628024Equity4797149527Debt/equity0.59:10.56:1According to the presented table, it can be seen that in 2013, debt to equity ratio was 0.59:1which has been decreased to 0.56:1 due to repayment of debt capital and more use of share capitalto meet the long-term capital requirement (Bellostas and López-Arceiz, 2016). Higher ratiodemonstrates that organization is aggressive in collecting funds through debt sources. In otherwords, entity is willing to take more risk in their business due to aggressive leverage practices.3

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