Structuring Corporate Financial Policy: Diagnosis of Problems and Evaluation of Strategies

Successful diagnosis and prescription depend heavily on thoughtful creativity and careful judgment. Three basic stages in that process: 1. Description : the ability to describe a firm's financial policies is an essential foundation of diagnosis and prescription 2. Diagnosis : benchmark perspectives, then one compares the idealized and actual financial structures, looking for opportunities for improvement 3. Prescription : action recommendations should spring from the insights gained in description and diagnosis PART I : IDENTIFYING CORPORATE FINANCIAL POLICY : THE ELEMENTS OF ITS …

…firm as indicated by the percentage distribution of share ownership and by the structure of debt covenants 5. Timing : asks the question of whether the current capital market environment is the right moment to implement any alternative financial structure, and what the implications for future financings will be if the proposed structure is adopted The flexibility, risk, income, control, and timing framework can be used to indicate the relative strengths and weaknesses of alternative financing plans.