Corporate Finance & Investor Strategy

This assignment delves into the crucial aspects of corporate finance and investor strategy. It explores various financing methods available to companies, such as crowdfunding, bank loans, equity financing, and venture capital, highlighting factors influencing their selection based on business strategies and cash flows. Furthermore, it examines different dividend policies – residual, stability, and hybrid – explaining how companies determine shareholder payouts and the impact of these decisions on investors.

Strategy Plan Overview Assignment
Capstone Assignment
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Finance Strategy
How are you going to fund the company?
Finance Strategy involves critical decisions in every economic climate, especially in cases of
start-up funds, expanding capital or in cases to hold during tough times. While obtaining funding
or finances for corporate functions there are several factors that has to be considered (Smith,
2011). The types of finances might vary for varied businesses. They can be Crowdfunding, bank
loan, equity or bootstrapping, funding from friends or family, Angel investors, business partners,
venture capitalists, cloud funding or any other suitable methods. In equity bootstrapping method
the business is expected to fund itself as it grows. In case of self-funding approach, entrepreneurs
are seen to fund their own business ventures. Often businesses obtains loan from their family and
friends for the purpose of raising capital. Angel investors are individuals who want to invest into
businesses. Cloud funding are group of investors that access by means of internet. Venture
capitalists are those eager to fund businesses during their start-up period. Crowdfunding are web-
based projects that fund business ventures. Determining type of financing is primarily dependent
on overall business strategy and cash flows that are generated out of the project. Cash flows that
are generated from a particular project for which investment is sort is used to payback funding
that is raised for it. Such paybacks can happen in varied methods as fixed payments, payments
through dividends or any other processes (Johnson, 2008). Interest rates or payment terms help
access and understand type of finance strategy that is to be selected for a given type of project.
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Investor Strategy
What is your dividend policy?
Every Company has a set of guidelines or policy that is used to ascertain dividend policy.
Divided policy helps ascertaining payments that the company needs to make towards its
shareholders (Bushee, 2012). A Company can select any of the three types of dividend policy as
residual dividend policy, stability dividend policy or a hybrid of the two dividend policy.
Approaches to dividend policy is ascertained based on joint decisions taken by shareholders
along with management of the company. In case of residual dividend policy, the company selects
on internal equity generation for financing of new projects. Dividend incomes hence come from
leftover equity post meeting of capital requirement for a particular project. This methods helps
maintain debt is to equity ratios prior to making any sort of dividend distributions. Dividend
stability policy results from any sort of fluctuations that is generated from residual policy. In
stability dividends are paid quarterly as set against fractions of yearly earnings (Ingley, 2011).
This is a certain dividend income method for equity holders as it generates regular income.
Hybrid dividend policy is a combination of stable and residual dividend policy. As per this
concept, companies view debt is to equity ratio as a long-term approach as against short term
goal. This approach is adopted more by corporates towards paying off their dividends to equity
shareholders.
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Reference Lists
Bushee, B. J. (2012). Investor relations, firm visibility, and investor following. The Accounting
Review, 867-897.
Ingley, C. M. (2011). The financial crisis, investor activists and corporate strategy: will this
mean shareholders in the boardroom? Journal of Management & Governance, 557-587.
Johnson, G. S. (2008). Exploring corporate strategy: text & cases. Pearson Education.
Smith, J. S. (2011). Entrepreneurial finance: strategy, valuation, and deal structure. Stanford
University Press.
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