Financial report to the board of directors of Arkle plc
Seminar paper from the year 2009 in the subject Business economics - Investment and Finance, grade: 1,7, University of Sunderland, course: Financial Management, language: English, abstract: This report is dedicated to the board of directors of Arkle plc with the intention of giving a better understanding about the role and nature of financial management. This report shows the two key concepts, the time value of money and the relation between risk and return, of corporate finance in first place. Furthermore it points out the importance of our role as the managers of Arkle plc and how important our decisions are in relation of the company's overall objective, the shareholder wealth maximization. In addition to this it explains why the company has to chase this specific main goal instead of other objectives like the maximization of profit or social responsibility. The second part of the report focuses on the capital structure and sources of the company. It first explains the principles of the sources of finance which is of high importance because this is the way gearing the company. It is crucial for Arkle plc to equiponderate the amount of equity- and debt to reach the best level of leverage and therefore approach the company's optimal structure. However, capital has its costs and consequently it is necessary for Arkle plc to identify them well. It is fundamental for the company to know that the lower its average cost of capital, the higher the value of the company. Furthermore the cost of capital is significant in making investment decisions. Once the company knows about its costs and structure it is able to invest in wealth creating assets which is the topic of the third part of this report.
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