Scott Equipment Organization Paper
Scott Equipment Organization Paper
Tessa Carey, Monique Cratty, Estevania Delgado, and Nora Villalobos
FIN/419
December 17, 2011
Professor Jennifer Stapp
Scott Equipment Organization Paper Many small companies use debt financing to achieve financial goals. Some choose to use debt consolidation financing. By having a wide range of financing options available, a company is able to get their business up and running faster. This paper will examine three options of financing for Scott Equipment. The aggressive, moderate, and conservative financing options will be calculated and compared in order to determine the best option for Scott Equipment.
Summary of Short-Term and Long-Term Financing Policy Options Short-term financing is usually used for a term of six to twelve months. It is typically used to increase the company’s amount of available working capital. This in turn assists the company in having the ability to buy a much needed piece of equipment or to pay utilities and suppliers. In this exercise, we were given the following table of financial information to assist in the determination of the best financing choice.
|Financial Policy |Millions of dollars |
|Current Assets |$30 Million |
|Fixed Assets |$35 Million |
|Expected Sales |$60 Million |
|EBIT |$6 Million |
|Tax Rate |40% |
|S.E. used for financing of |$40 Million |
|assets | |
Aggressive Financial Policy
Aggressive financing policies “...are those policies of investing a company’s assets to gain the highest rate of return on the investment”(Murdock). The two most common advantages to using this option of financing are:
Less chance of incurring bad debts
Money is typically recovered quicker and thus
Tessa Carey, Monique Cratty, Estevania Delgado, and Nora Villalobos
FIN/419
December 17, 2011
Professor Jennifer Stapp
Scott Equipment Organization Paper Many small companies use debt financing to achieve financial goals. Some choose to use debt consolidation financing. By having a wide range of financing options available, a company is able to get their business up and running faster. This paper will examine three options of financing for Scott Equipment. The aggressive, moderate, and conservative financing options will be calculated and compared in order to determine the best option for Scott Equipment.
Summary of Short-Term and Long-Term Financing Policy Options Short-term financing is usually used for a term of six to twelve months. It is typically used to increase the company’s amount of available working capital. This in turn assists the company in having the ability to buy a much needed piece of equipment or to pay utilities and suppliers. In this exercise, we were given the following table of financial information to assist in the determination of the best financing choice.
|Financial Policy |Millions of dollars |
|Current Assets |$30 Million |
|Fixed Assets |$35 Million |
|Expected Sales |$60 Million |
|EBIT |$6 Million |
|Tax Rate |40% |
|S.E. used for financing of |$40 Million |
|assets | |
Aggressive Financial Policy
Aggressive financing policies “...are those policies of investing a company’s assets to gain the highest rate of return on the investment”(Murdock). The two most common advantages to using this option of financing are:
Less chance of incurring bad debts
Money is typically recovered quicker and thus
References: http://www.answers.com. Current Ratio. Retrieved from htttp://www.answers.com on December 14,2011. Gitman, L. J. (2009). Principles of managerial finance(12th ed.). Boston, MA: Pearson Addison Wesley. Murdock, Rachel. Aggressive Financial Principles. Retrieved from http://www.ehow.com on December 14, 2011. Watson, Denzil and Head, Antony (2007). Corporate Finance: Principles and Practice. England: Pearson Education.