Investing excess working capital

Article Abstract:

Treasury personnel responsible for investing an organization's funds must know exactly what senior management expects from the investment program and its limits on investments. Management must establish objectives and restrictions for the treasury staff that delineate management's goals in order to avoid misunderstandings. Management must identify the important elements of the investment program and translate them into guidelines in a policy statement that addresses the issues of: safety of the principal, liquidity, and rate of return, in order of importance; acceptable investment vehicles; maturity and exposure limitations; investment responsibility; and reporting requirements. An operational program should: establish a process for promptly updating the portfolio; contain accounting information dealing with premia, discounts, and interest; and delineate safekeeping/custodianship provisions for securities.

Evaluation, Investments

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Tapping the hidden value of your assets

Article Abstract:

Companies can mobilize the hidden value of real estate and capital assets to provide a source for funds or provide security to lenders, thus lowering the cost of borrowing. Approaches to realizing value from real estate assets include: selling excess or underused property; selling and leasing-back property; or spinning-off operating units. Revaluing real estate book value to market value increases the value of total assets and, by subtracting liabilities, derives a realistic equity value and maximizes shareholder value. In a sale-leaseback, companies sell real estate and then lease it back immediately, providing the company with immediate cash without disrupting operations. Companies can access the value of their fixed assets by using their plant and equipment as loan collateral in order to increase their borrowing capacity.

Capital assets, Valuation, Real property, Real estate appraisal

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How to estimate the effect of a stock repurchase on share price

Article Abstract:

An analytical model is presented that can help corporations to repurchase stocks without adversely affecting the stock's price. The model is based on the assumptions that: a capital asset pricing model approximates the risk-return trade-off; the size of the company and its assets are the same after the repurchase; expected operating earnings are not affected by the repurchase; the repurchase is made by replacing equity with debt; and the company's growth is steady. The model deals only with the lower limit of stock repurchases, because most companies repurchase outstanding stock in relatively small amounts.

Usage, Economic aspects, Accounting and auditing, Stock price forecasting, Capital assets pricing model, Capital asset pricing model, Stock redemption

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