APA Format In-Cite Citation References: 300 Or More Words

APA Format In-cite citation References 300 or more words

There is a common phrase in business: "Cash is king." "Cash flow is the life-blood of a company. Without it, a company will fail" (Hicks, 2012). Yet, companies often have to take risks that could potentially jeopardize their cash flow (e.g., new projects, growth, capital budgeting, etc.). Assume you are the CFO of a struggling company. While you do have a positive cash flow, it is minimal at best.

If something does not change soon, the company will go under. Fortunately, your product development team has just created a new product that will not only save the company from financial demise but will also revolutionize how the industry does business. The problem is that the product is still 2 years away from being able to be sold to the public, and you will run out of cash within the next 6 months. How would you propose obtaining the funds needed to keep the company alive and thriving for the next 2 years until you are able to see a return on the product development? How would you keep the stakeholders happy?

Paper For Above instruction

In scenarios where a company faces imminent financial distress, especially with a promising new product on the horizon, strategic financial planning becomes crucial. As the CFO, securing additional funding to sustain operations until the product is market-ready is imperative. Several avenues could be considered, each with its own advantages and risks, to ensure the company's survival and stakeholder confidence.

One immediate approach is to seek short-term financing options, such as a bridge loan or a convertible note. Bridge loans provide quick capital infusion, often at higher interest rates, but are suitable for short durations and can be repaid once the product generates revenue or alternative funding is secured (Damodaran, 2012). Convertible notes, which convert into equity upon certain conditions, can be attractive as they delay dilution but still offer necessary liquidity (Metrick & Yasuda, 2010). These instruments would help cover operational expenses during the critical 6-month period, preventing insolvency.

Equally important is improving cash flow through strategic asset management. This may involve disposing of non-core assets, renegotiating existing contracts to reduce costs, or delaying discretionary expenditures. These measures can provide additional liquidity without the need for external funding, thereby reducing financial stress (Brigham & Ehrhardt, 2017). For example, leasing equipment instead of purchasing outright or renegotiating supplier terms could free up cash flow in the short term.

equity financing options could also be explored, such as raising funds through private investors or venture capitalists interested in the company's future potential. Offering equity stakes in exchange for capital can provide the necessary financial support while reducing debt obligations. However, this approach might dilute existing ownership and control, which requires careful stakeholder management (Gompers & Lerner, 2004).

In parallel, transparent communication with stakeholders—including shareholders, employees, and creditors—is essential. Explaining the company's turnaround plan, the significance of the new product, and the expected timeline for profitability can foster trust and support. Regular updates and involvement of stakeholders in strategic decisions can mitigate fears and reinforce confidence in the company's future (Fombrun & Van Riel, 2004). Sharing a clear, feasible plan for bridging the financial gap and demonstrating commitment to responsible management are key elements in maintaining stakeholder satisfaction.

Additionally, exploring government grants or subsidies aimed at innovation or technological development could supplement financing efforts. Such sources are non-dilutive and can provide vital capital without increasing debt or diluting ownership (Hicks, 2012). Engaging with local or national innovation agencies can also enhance the company's credibility and provide additional resources.

In conclusion, navigating a impending financial crisis while awaiting a lucrative product launch involves a multi-faceted approach. Combining short-term financing, asset management, stakeholder communication, and government support can create a resilient strategy. The priority must be to preserve cash flow, maintain stakeholder trust, and position the company for a successful product launch, ensuring long-term sustainability and growth.

References

• Brigham, E. F., & Ehrhardt, M. C. (2017). Financial Management: Theory & Practice. Cengage Learning.
• Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. Wiley Finance.
• Fombrun, C. J., & Van Riel, C. B. (2004). Fame & Fortune: How Successful Companies Build Winning Reputations. Pearson Education.
• Gompers, P., & Lerner, J. (2004). The Venture Capital Cycle. MIT Press.
• Hicks, J. (2012). Strategic Financial Management. Routledge.
• Metrick, A., & Yasuda, A. (2010). Venture Capital & the Finance of Innovation. Wiley.
• Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of Financial Economics, 52(1), 3-46.
• Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 575–592.
• Oxelheim, L., & Gregoriou, G. N. (2018). Corporate Governance and Financial Performance. Routledge.
• Schmidt, R. A. (2003). Financial decision-making and risk management in the corporate sector. Journal of Business Strategy, 24(2), 47-55.