Corporate Finance Essay

There is a common phrase in business: \”Cash is king.\” \”Cash flow is the life-blood of a company. Without it, a company will fail\” (Hicks, 2012). Yet, companies often have to take risks that could potentially jeopardize their cash flow (e.g., new projects, growth, capital budgeting, etc.). Assume you are the CFO of a struggling company. While you do have a positive cash flow, it is minimal at best. If something does not change soon, the company will go under. Fortunately, your product development team has just created a new product that will not only save the company from financial demise but will also revolutionize how the industry does business. The problem is that the product is still 2 years away from being able to be sold to the public, and you will run out of cash within the next 6 months. How would you propose obtaining the funds needed to keep the company alive and thriving for the next 2 years until you are able to see a return on the product development? How would you keep the stakeholders happy?

SAMPLE SOLUTION

The phrase “Cash is King” in any financial institution is true as without financial ability, organizations may end up recording detrimental financial statements. Any organization that has excess cash finds it easy to convert cash into fixed assets but still experience a positive net present value. This may not be the case for a company that is foreseeing cash deficits. For the case study provided, if I am the chief finance officer, I will consider decisions that have both short and long term impacts (Bhandari & Adams, 2017). For short term, use of venture capitalists to help invest in new but promising projects seems to be the best alternative. However, as a way of ensuring accountability, I will also investigate why the organization is experiencing financial strain.
It may be necessary to reduce unnecessary expenses as a company. For fairness sake, I will convene a meeting with top managers where I will endeavor to hold each one of them accountable. It will be important to explain to them the need to be….