CFO cum Business Advisory

Corporate Finance to Achieve Your Business Success

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Lately I have helped one of my value clients to “rectify and fix” their internal Corporate Finance procedure to bring its expansion path back on track, operational cash has started pouring in, all in 3 months’ time !

This client engages in high capital expenditure investment business, but good cash inflows would come in once capital equipment commence operation.

The issues were in evaluating whether to take on the Capital Investment, if so, the Negotiation on the the timing & progressive quantum of making these investment, & the daily Cash Management part thereafter.

I went in to my client’s firm in July 2016 to perform a “Health Check”, & then put forward a series of “Quick Fixes” in August to the Board of Directors & Board of Shareholders, some result started showing in September month, & then the company achieved the 2-year to-date best performing month in October !

 

What is ‘Corporate Finance’ ?

It…
* consists of the financial activities related to running a corporation

* is primarily concerned with maximizing shareholder value through long-term & short-term financial planning & the implementation of various strategies

Areas of Corporate Finance include :
1. Capital Investment
2. Capital Financing
3. Gearing and Cost of Capital
4. Short Term Liquidity
5. Just name a few

Allow me to just touch on 2 specific expertise areas which I have been doing all these years in my previous capacity as CFO, which I have recently helped my value client nurse his operation back to healthy expansion path :-

 

1. Capital Investments

* 1 of the tasks in corporate finance is to make capital investments

* The decision process of making capital investments is mainly concerned with Capital Budgeting, a key corporate finance procedure

* Through Capital Budgeting, a company identifies capital expenditures (which normally involves significant sum of money), estimates future cash flows from proposed capital projects, compares planned investments with potential proceeds, & decides which projects to be prioritized to be included in its Capital Budget in order to bring in maximum profit using the scarce resource called “Cash”

* Making Capital Investments is perhaps the most important corporate finance task & can have serious business implications

* Poor Capital Budgeting that causes over-investing or under-investing could put a company in weaker financial condition, either because of increased financing costs or having an inadequate operating capacity

* Properly planned out & timed Capital Expenditures ( which usually have longer construction lead time ) would match the business growth would bring in incremental Sales and hence Profit growth.

 

2. Short-Term Liquidity

* Corporate finance is also tasked with short-term financial management, with a goal to ensure enough liquidity to carry out ongoing operations

* Short-term financial management concerns exclusively current assets & current liabilities, or working capital & operating cash flows

* A company must be able to meet all its current liability obligations when due

* This involves having enough current assets that can be cash-ready, such as short-term investments, to avoid any liquidity or cash crunch from disrupting a company’s operations

* Short-term financial management may also involve getting additional credit lines or issuing commercial papers as liquidity back-ups

* You may wish to read my the other article titled “Cash is King !” to get the “6-Proven-Rules Tool Kit” on effective cash management especially for SME businesses

Hope the above let you have a glimpse of Corporate Finance at work in your every day business management.

Feel free to let me know if you need to know more on their implementation techniques.

Good Luck !

If you need help, feel free to contact us at :

(O) +65 63851011

(M) +65 90880669

(E) [email protected]

www.corporatebackoffice.com.sg

Written by Kelvin Loh