FIN120-Financing Decision1

Topic: Financing Decisions

Sources of borrowed funds (debt): 借入资本的来源

Bank loans, leases, the sale of debt securities to investors External sources of equity: 权益资本的外部来源

The sale of preferred and common stocks to existing and new shareholders

Internal sources of equity: 权益资本的内部来源

The cash generated from the firm’s operations (Retained earnings)

1)Estimating the amount of required external funds

估算所需外部资金的数量

To determine the amount of external funds it will need, the firm must estimate:

•the amount by which its investments are expected to grow during the coming year

未来一年中各项投资的预计增长数量

•the amount of internal funds the firm expects to generate next year. 公司未来一年预计可产生的内部资金数量

If a firm’s assets are expected to grow by more than the firm’s internally generated funds, external funds will need to be raised to make up the difference.

•Most firms raise the external funds they need through

borrowing 多数公司外部资金的筹集通过借款来完成

Funding needs 资金需求

= ∆Cash + ∆WC + ∆Fixed assets

* ∆Cash --- the change of in the firm’s cash and cash-equivalent holdings

* ∆WC --- the change in working capital accounts

(any change in inventories, accounts receivable less

any change in accounts payable)

* ∆ Fixed assets --- new capital expenditures and acquisitions

less than cash raised from the sale of

existing fixed assets (disposals). Internally generated funds 内生资金

= Retained earnings + Amortization expenses

= (Net Income – Dividends) + Amortization

* Amortization expenses are charged against the firm’s net profit (EAT) but are not cash expenses.

External funds needed 外部资金需求

= Funding needs – Internally generated funds

= [∆Cash + ∆WC + ∆Fixed assets]

– [Retained earnings + Amortization expenses]

* Interest & Dividend has already been taken into account

How firms raise external funds? 公司如何筹集外部资金These funds are raised through the financial system 金融体系.

1)The financial system: its structure and functions

金融体系：结构和作用

A)The fundamental role of a financial system

金融体系的基本作用

To act as a conduit through which the cash surplus of savers is channeled to firms that need cash.

充当一个通道，将储备者多余的现金送达到需要资金的公司Cash transfer role 现金转移者角色

--- The major driver of sustained corporate growth

公司持续增长的主要驱动力

B) Definition

The institutions and processes that facilitate the transfer of funds between the suppliers of capital and firms that need cash 为了方便资金在资金供给者和资金短缺公司中转移而建立的机构及资金转移的过程

Suppliers of funds (Left side of Exhibit) 资金供给者

a)Most cash surplus is provided by the household sector.

个体经济单位