Management of Financial Resources and Performance

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S. No
DESCRIPTION
Page No
1
INTRODUCTION
4
1.1
RESOURCES
5
1.2
TANGIBLE AND INTANGIBLE RESOURCES
6
2.1
SHARE CAPITAL
7
2.2
OTHER SOURCES OF CAPITAL
8
2.3
PERFORMANCE RATIOS
9
3.1
INTERNATIONAL TRANSACTIONS AND COMPETITIVE ADVANTAGE
10
4.1
PERFORMANCE OF TANGIBLES AND INTANGIBLES
10

TASK 5
11
5.1
CASH-FLOW FORECASTING
12
5.2
INVESTMENT APPRAISAL
12
5.4
INTERNAL RATE OF RETURN
14
7.1
EFFECTIVENESS OF COMMUNICATION
14
8.
CONCLUSION
15
9
BIBLIOGRAPHY
17

INTRODUCTION
Online giants, America Online, offer a prime partnership example. Within this alliance AOL hopes to gain more hits, visitors, and ultimately paying subscribers to its sites, whereas Amazon seeks to tap into AOL’s subscriber base, one it believes to be a strong demographic match to its own, in an effort to sell more books, toys, and CDs. America Online (AOL), a leader in the then-young field of interactive media, quickly adopted the new accounting method. The company did not recognize these costs as incurred. Instead, AOL capitalized the expenditures, and then amortized them over periods of 12 to 18 months. By the end of its fiscal year ending June 30, 1994, AOL’s balance sheet showed $37 million of subscriber capitalized acquisition costs. AOL reported a $6.2 million net profit in fiscal 1994 instead of a loss of around $6 million.

1.1Resources
Equity is the amount of money invests by the shareholder while purchasing shares of the Company. Variations on this concept are the lease, in which the creditor may own the underlying asset and preferred stock, in which there is no obligation to pay back the funds on a specific date, but there is an interest payment obligation. Preferred stock is also a variation on equity, because it is not collateralized and there is no obligation to pay it back on a specific date. Another variation on the equity concept is stock rights, which can be issued to current shareholders, giving them the right to purchase more shares of stock. Also, warrants can be attached to various debt instruments to make them more attractive; warrants give the holder the right to buy common stock at a specific price. These are all forms of funding that fall under the general concept of equity. Preferred stock can also be considered something of a hybrid, because it contains characteristics of both debt (with a fixed interest payment) and equity (with no specified payback date for the underlying investment). Robert C. Higgins. Analysis for Financial Management, 4th Edition. Chicago: Irwin, 1995

COSTS OF FUNDING OPTIONS
The amount obtained from the financial institution. The interest rate charged will vary greatly, depending on the willingness of the borrowing organization to put up its assets as collateral. If it is not willing to do so or has no significant assets to use as collateral, then the risk of the lending institution is correspondingly greater, because it will have no specified assets at its disposal for liquidation purposes if the borrower is unable to pay for the borrowed funds. For this type of debt, the interest rate can be quite a few percentage points higher than the prime rate charged by local lending institutions. Also, if the borrower has a spotty earnings or debt payment record, lenders will charge the highest possible interest rates for use of their funds. This may sound as though debt is an expensive option, but it can be extraordinarily inexpensive for those companies with a large base of available assets for use as collateral. Also, if the borrowing company is a very large one with an excellent financial credit rating, it can borrow well below the prime rate, perhaps only a fraction of a percent above the London Inter bank Offer Rate (LIBOR), which is the minimum borrowing rate available. For these institutions, it makes a great deal of sense...
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