Executive Corporate Finance: The Business of enhancing shareholder value

Chapter 3. Financial policy

Introduction

Financial policy considers the near-term and long-term corporate strategy to determine which policy measures optimally support the execution of strategic objectives. The strategic financial operations are guided by a set of high-level and strategic policy directions, often approved at board level. Tactical financial operations are rather mundane, and require adequate and effective processes and controls. For example, the capital structure, and the composition of the debt and equity structures within the capital structure reflect a company’s funding needs, its need for flexibility and risk tolerance, debt covenants, credit rating, asset-liability mix, dilutive effects on equity holdings, and utilization of ...