Corporate Financial Decisions: Analyzing Investments and Compliance

This assignment delves into key corporate financial decisions. It explores the advantages and disadvantages of selling bonds and stocks, recommending a strategy to sell coupon stocks to fund school fees and reinvest the remainder. The assignment then compares bonus and stock options, concluding that shares are more profitable due to potential price increases and dividends. It also addresses compliance issues, particularly the sale of unregistered shares, and outlines the information a financial manager must comply with, including Regulation Fair Disclosure, interim reports, proxy reports, annual reports, and insider trading. References to relevant financial literature are provided.

Corporate financial decisions

School versus work
b.
The advantage of selling a combination of bonds and stocks includes that the portfolio
will be diversified and the risk can be hedged which helps to generate higher revenue
within the particular time period. The disadvantage of selling both the bonds and stocks
includes that the transaction cost is very high because both the securities have different
selling cost of the transaction (Bodie et al., 2014).
c.
The best solution is to sell the coupon for $121,250 which will cater the school fees
($100,000), and the remaining amount ($21,250) will be reinvested through buying the
shares on the basis of price trend which helps to generate higher returns.
d.
The sources of income are three, namely, job's income, dividends and coupon stock. So
the dividend will be received yearly, and the coupon stock will also provide the income
after selling the stock, but the job income is a regular monthly income which helps to
generate sustainable amount of income. The selling of 50% stock is $50,000, selling of
coupon stock is $121,250, but the income is $25,000*12 which is 300,000 yearly. The
salary is assumed.
Bonus vs. Stock
a. The bonus has the value of $5,000, and the share option is worth $50 per share which
is $5,000 for 100 shares. So the best choice is to accept the shares.
b. The advantage of selecting the shares includes that the share price are increased, and
accrued dividends are also increased. The disadvantages of selecting the shares option
include that the performance of the stock is low (Berk et al., 2013). The advantage of
bonus is that the amount can be invested for the long term and the disadvantage is that
the amount is fixed and there is no other income in the future.
c. The obtaining of shares is more profitable than the bonus because the share price and
accumulated dividend increases in the future but the bonus amount will remain fixed.
For example, the bonus is $5,000 and share price is $50 per share than the share price
is selected due to increase in the share price.
Compliance
a. The sale of unregistered shares is the area in which the concentration is on the
secondary market. The gaining of interest in this type of securities increases the
level of cost to the shareholders through collective investment which also
increases the risk to the fund manager according to the Financial Regulatory
Authority.
b. As the financial manager, the following information needs to comply:
1. Regulation fair disclosure
The disclosure allows t release the financial information of the company to the
investors as well as the public (Campbell et al., 2016).
2. Interim report

The report is filed at the time of subsequent amendments in the business are
required.
3. Proxy report
It is the report which is prepared before the annual meeting, and it comprises
of the topics discussed in the meeting.
4. Annual report
It is prepared for the year ending, and it comprises of affluence of information
related to the company.
5. Insider trading
It is done when the people are associated with the organisation in order to
purchase and sell the shares of the company.

References
Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments, 10e. McGraw-Hill Education.
Berk, J., DeMarzo, P., Harford, J., Ford, G., Mollica, V., & Finch, N. (2013). Fundamentals of
corporate finance. Pearson Higher Education AU.
Campbell, J. L., Twedt, B. J., & Whipple, B. C. (2016). Did Regulation Fair Disclosure Prevent
Selective Disclosure? Direct Evidence from Intraday Volume and Returns.