Financial Planning and Agency Conflicts
The desired attributes of a board of directors that I will recommend are emotional intelligence and commitment ( Croci, 2018). Emotional intelligence is the ability for one to recognize their own and others' emotions, to distinguish different kinds of emotions and act on them appropriately. Emotional intelligence will guide the behavior and thinking of a board director. One will be able to connect with others hence an easy way of handling stressful situations and better decision making for the organization. This attribute improves collaboration among board members and employees ( Croci, 2018).
The second attribute is the ability to commit. Commitment is as crucial as emotional intelligence for an effective board director. Sitting in a boardroom is time-consuming; board directors are also required to take necessary training, committee meetings, strategy and planning days, and building relationships with board members, investors, and stakeholders. All this workload will only be possible if one is committed to it ( Croci, 2018).
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Week 8 question
Distributions to Shareholders and Capital Structure Decisions
Organizations issues stick dividends to maintain the earnings of an organization and make it more valuable in the future; therefore, increasing stock prices. A stock split, on the other hand, is performed because the organization stock is outperforming the organization's goals. The organization uses stock split to reduce the prices of stock to an acceptable price range (Brigham & Houston, 2012). Stock dividend is also a type of payment in the form of shares made to stakeholders instead of cash, while the stock split is the increase in the number of shares in an organization. Common split ratios used are 3-for-1 and 2-for-1, which implies every shareholder will have either two or three shares for every share previously held (Brigham & Houston, 2012).
I will prefer a 100% stock dividend. Dividends mean one gets one share of the stock dividend for every share that one owns. Most investors prefer steady income, which is associated with dividends, and therefore they will be able to buy the company's stock (Brigham & Houston, 2012). Dividends show the growth levels of a company, in 2003 when Microsoft announced that it was going to pay dividends, it was clear that it had entered a new life cycle stage. In 2018 it raised its dividends to 46 cents per share.
Week 9 question
Multinational Financial Management
Most organizations are known to borrow where the interest rates are low. However, some reasons make Multinational corporations borrow in a country with high-interest rates rather than in a country with a low-interest rate. The main reason is inflation. If that country has a high inflation rate, it means the purchase power parity for its currency is low. (Brigham & Houston, 2012). For instance, a US multinational corporation that has investments in Brazil will have to borrow using the same currency where they are going to invest, and it is advantageous to the organization because it will attract investment, and the country's economy will benefit from the interests.
Week 10 question
Working Capital Management
Working capital is simply an indicator of a short-term financial position of an organization. It is the difference between current liabilities and current assets. Each organization has different needs for how much working capital they should have, but organizations do not prefer holding excess or little working capital because they both harm the company ( Michalski, 2014).
Having too little working capital means the organization is unable to meet its financial obligations. For example, if an organization loses its inventory, little working capital will make it difficult for them to replace ( Michalski, 2014). Too much working capital, on the other hand, means there are no investments in the assets. For example, if a company has a high level of cash, it means the organization management cannot find other better uses of the cash, therefore, limiting the organization's return on investment. Organizations management should manage working capital to an acceptable level ( Michalski, 2014).
References
Brigham, E. F., & Houston, J. F. (2012). Fundamentals of Financial Management . Cengage Learning.
Croci, E. (2018). The Characteristics of the Directors. The Board of Directors , 107-149. https://doi.org/10.1007/978-3-319-96616-8_3
Michalski, G. (2014). Working Capital Management in the Business Context. Value-Based Working Capital Management , 7-31. https://doi.org/10.1057/9781137391834_2
