"Points Covers in Corporate Finance "

Hi this is Manoj Gupta owner of www.camanojgupta.com

A useful presentation on Project Financing is enclosed. Hope this might be useful.

Hi this is manoj gupta, owner of www.camanojgupta.com

Corporate financing means financing of business by Long Term and Short Term techniques including managing and optimum utilisation of funds. It also cover the associated risks.

For detailed study refer the above mention web site

Long Term Technique: (for example)

1.    Equity Infusion (equity share capital or preference share capital)

2.    Unsecured Loan from promoter (with long term vision)

3.    Long Term Loan from banks/financial institution, debentures

4.    Creditors for capital goods

Short Term Technique: (for example)

1.    Working capital limits (both fund based and non-fund based) for financing of inventories, debtors, other current assets, to meet day-to-day expenses, other expenditure which is not meant for long term perspective.

2.    Short term loan

3.    Sundry creditors and advance from customers 

Working Capital Management

-          Work out the financial viability on the basis of the balance sheet (to calculate all the ratios). It will answer the following questions:

o   Company Working Capital Gap. We need to work out the working capital gap for the FY under consideration. If creditors are higher than bring down the creditors and replace with cheap financing i.e. CC Limit

o   Whether company is over leveraged or under leveraged i.e. calculate the D:E ratio and TOL/TNW

o   Quality of inventory and debtors.

§  Bank normally does not finance debtors more than 120 days. But if industry nature suggest than they can go upto 180 days.

§  Stock level also depends industry to industry

o   Trend of turnover and profitability

-          Prepare the justification for any weaknesses found in during the financial viability

-          Prepare the future projections keeping in view of

o   the past trend of turnover and income

o   future prospect

o   limit require both FB and NFB

-          After satisfaction of the above facts present the case with bank with CMA data

Capital Investment

-          Understand the type of investment e.g. expansion of existing, new factory. It means end use must clearly define.

-          Whether the promoters are in same line of business or they have appointed some professional. Normally bank satisfies if there is backward integration. If promoters do not have idea of the business, chances of failures are very high.

-          Here we need to take the entire idea about the business model, product, industry and end use. For example real estate is in negative list and banks are not interested to fund.

-          Work out the cost of project including margin money for working capital and means of finance (promoters contribution, debt etc)

-          Bank normally wants that promoters should fund upto 40% of the cost of the project. Work out the D:E of the project

-          Prepare financial projections

-          Calculate DSCR, IRR, pay-back period, Breakeven point