Question

In how many categories a company's financial policies fall ?elaborate these and explain which financial policy talk about , the rise in stock price is a capital gain.

this is business finance question iwant detailed answer with example

Answer 1

a. Capital Budgeting: What long-term investments should the firm take?

Capital budgeting deals with how the organization will invest in itself. Some of the long term investment which an organization can take include investing in stocks and index funds.

b. Capital structure: Where will the firm get the long-term financing to pay for its investments? Also, what mixture of debt and equity should it used to fund operations?

Capital structure deals with how the organization will get a source of funds to make investments. The organization can get a loan from financial institutions that have lower interest rates.

c. Working capital management: How should the firm manage its everyday financial activities?

Working capital management deals with daily activities in an organization. Organizations can make sure that they collect their customer's debt and pay their suppliers to manage daily financial transactions.

Capital Structure is the financial policy which talks about the rise in stock price is a capital gain.

The capital structure of a business firm is essentially the right side of its balance sheet. Capital structure, broadly, is composed of the firm's debt and equity. ... For example, the capital structure of XYZ, Inc. is 40% long-term debt (bonds), 10% preferred stock, and 50% common stock.

A company’s capital structure points out how its assets are financed. When a company finances its operations by opening up or increasing capital to an investor (preferred shares, common shares, or retained earnings), it avoids debt risk, thus reducing the potential that it will go bankrupt. Moreover, the owner may choose debt funding and maintain control over the company, increasing returns on the operations.