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Pages:
7 pages/β‰ˆ1925 words
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Style:
Harvard
Subject:
Accounting, Finance, SPSS
Type:
Essay
Language:
English (U.S.)
Document:
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Date:
Total cost:
$ 32.76
Topic:

Fortescue Metals Group Limited Company Financial Policy Decision-Making

Essay Instructions:

2000 words.

Essay Sample Content Preview:
        FIN3CSF Finance: Fortescue Metals Group Limited Company Financial Policy Decision-Making Name Date  
Table of Contents 1. Working capital management policies. 3 Current asset investment. 3 Financing policies. 4 Cash conversion cycle. 4 2. Weighted average cost of capital (WACC). 5 Cost of Debt. 5 Cost of equity. 5 Cost of WACC. 6 3. Capital structure determination policy. 6 4. Earnings distribution policy. 9 Dividends declared/paid. 10 Dividend per Share. 10 Divided imputation. 11 Franking dividend policy. 11 5. Corporate financing policies employed by to Fortescue. 12 Reference list 13    

1. Working capital management policies

Working capital management policies allow the company to continue the day to day operations where the liquid assets are managed with a view of meeting the short-term responsibilities, while avoiding tying up the money as this would affect profitability. Working capital management makes it easier to meet production targets as Fortescue Metals Group Limited manages the short-term obligations as they fall due.  FMG uses a Working Capital Policy 0.5/1.5

 Current asset investment 

            Companies need to consider how the assets affect the performance and profitability, as limited liquated affects the ability of the firm to convert and use the cash. Being low on current assets and especially cash can constrain operations. In the current asset investment policies there are Relaxed (or “fat cat”) policy, Restricted (or “lean-and-mean”) policy and the Moderate policy. FMG combines a Restrictive policy and Moderate one  to minimize current asset holdings as mining companies  have lower account receivables while making huge sales and current assets are minimized. in choosing the moderate policy FMG neither has huge nor low account receivables  and combining the two policies maximize long-run earnings. In the financial year ended 2016, Fortescue Metals Group Limited’s share of the cash to total assets was 8.19%, but this was mainly because the company increased the plant and machinery assets. The total current assets were US$ 2,605 Million in 2017, while the current liabilities were US$ 2,202 Million (Fortescue Metals Group, 2017, p. 62).

06/07 06/08 06/09 06/10 06/11 06/12 06/13 06/14 06/15 06/16
Current Ratio Updated on
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