Corporate Financial Structure : Solution Essays

Assignment 1: —Corporate Financial Structure Though corporate capital structure (also called capitalization) and corporate financial structure are closely related, they do have some significant differences. Financial structure is determined from the full liabilities and equity position on the firm’s balance sheet, looking at the total liabilities, both long- and short-term and the equity used to fund the organization. Whereas corporate capital structure looks at the mix of equity and long-term liabilities—primarily debt. In other words, capitalization is the portion of funds raised by selling shares and financial structure is the portion raised by selling bonds. Determining the optimal financial or capital structure for a domestic U.S. firm requires in-depth analysis of a variety of factors. For multinational or global firms, the analysis can be much more complex than for domestic business organizations. As a member of the finance team for MNC Getting Bigger All The Time,Inc.(GBATT), You have been asked by the chief Financial Officer (CFO) to lead general Discussion on some of the complications and different risks in capitalizing an MNC and managing its financial structure. The CFO has asked that you specially cover the risks associated with currency denominations, economic and legal issues, and the different government roles. The CFO recommended a couple of sites for gathering information. • Organization for Economic Cooperation and Development (OECD)http://www.oecd.org • International Monetary Fund (IMF) http://www.imf.org Using the module readings, University online library resources, the Internet, and the sources cited above, do the following: • Explain, with examples, how risks associated with currency denominations, economic and legal differences between countries, and the different governments’ roles and attitudes toward business can affect MNCs’ risks, capital structure and financial structure decisions. By Saturday, September 6, 2014, post your responses to the appropriate Discussion Area. Write your initial response in 300–400 words. Your response should be thorough and address all components of the discussion question in detail, include citations of all sources, where needed, according to the APA Style, and demonstrate accurate spelling, grammar, and punctuation Assignment 2: Exchange Rate Risk As a member of the finance team for an MNC, GBATT, you’ve been tasked by the CFO with monitoring the value of the currency used in foreign and domestic spending. The CFO asked you to provide some possible strategies to hedge against exchange rate risk. Using the Argosy University online library resources, research strategies utilized to hedge against exchange rate risk. Then, based on your assigned readings and additional research, do the following: 1. Explain what exchange rate risk is and how it may affect international firms. 2. Identify three exchange rate hedging strategies and explain how GBATT could use them to help manage risks associated with exchange rates. 3. Provide some real-world examples of firms employing these strategies, citing sources to support your position. Beginning Thursday, September 11, 2014, post your responses to the appropriate Discussion Area . Write your initial response in 300–400 words. Your response should be thorough and address all components of the discussion question in detail, include citations of all sources, where needed, according to the APA Style, and demonstrate accurate spelling, grammar, and punctuation Assignment 3: Financial Position Analysis In this assignment, you will write a paper in which you will analyze an income statement, identify risks, and identify funding choices for a business that is expanding globally. Scenario: Your employer, Getting Bigger All The Time, Inc. (GBATT), a multinational corporation headquartered in the United States of America, is looking to expand operations into Brazil. GBATT manufacturers a variety of materials used in the residential and commercial building industries. The Brazilian economy has continued to expand, even in the current global economic downturn, and sales of GBATT materials to Brazilian companies have greatly increased. GBATT is exploring the possibility of building a new manufacturing facility in Brazil, not only to meet the increasing Brazilian demand, but also in anticipation of increased demand in other South American and Latin American countries once the global recession is completely over. The following is GBATT’s basic income statement for the last two years of operations.( please check attachments) GBATT Income Statement for Years Ending December 31 ($ millions) GBATT Income Statement for Years Ending December 31 ($ millions) Directions: The CFO has asked you to analyze the information to help the decision makers select among different options. He asked that your analysis include the following topics: 1. Operational Performance: Write a brief analysis of GBATT’s operational performance. Include discussion of the year over year performance. 2. Financial Markets and Funding Choices: Analyze the choices of funding for the new plant. Your analysis should include: a. Debt Financing i. Compare currency denomination choices for debt, and if debt is selected for financing suggest whether the debt should be denominated in U.S. dollars or Brazilian reals. ii. Compare centralized and decentralized denomination of debt and its effect on the debt issuance. iii. Determine if a fixed or a floating debt rate should be used. b. Equity Financing: Examine whether equity should be domestically listed in a single exchange, or cross-listed in multiple exchanges around the world. What are some advantages and disadvantages of each? Write a 5-6-page paper listing your findings. Make sure you write in a clear, concise, and organized manner; demonstrate ethical scholarship in accurate representation and attribution of sources; and display accurate spelling, grammar, and punctuation. Apply APA standards to citation of sources. By Monday, September 22, 2014, deliver your assignment to the M3: Assignment 3 Dropbox.