The Saudi Arabia Vision 2030 stated SMEs (Small-Medium Size Enterprises) struggles to access adequate funding from the financial institutions. Offer two recommendations specific to how this struggle should be effectively addressed and be in alignment with Saudi Vision 2030.
For Your SuccessIn this module, we will concentrate on the way the firm arranges its sources of funds. The argument about the effect of capital structure on the cost of capital is highlighted. The effect of financial leverage on the firm’s overall cost of capital is explained; then techniques useful for a financial manager to determine the appropriate financing mix of debt and equity. Make sure to read all the required readings this week and complete the Check Your Understanding activity.This week’s Discussion Question asks you to discuss the important questions financial managers should ask:
What level of assets are needed to operate?
- How to finance those assets or raise capital? (The firm can use equity or debt financing or combination of both.)
Select a publicly traded company (make sure your selected company is different from your classmates’) based in the KSA and look (in terms of percentage) at how it finances its operations using equity or debt financing.You are required to reply to at least two peer discussion question post answers to this weekly discussion question and/or your instructor’s response to your posting. These post replies need to be substantial and constructive in nature. They should add to the content of the post and evaluate/analyze that post’s answer. Normal course dialogue doesn’t fulfill these two peer replies but is expected throughout the course. Answering all course questions is also required.There is also a Live Session this week.Finance Principles for this module
Principle 3: Risk Requires a Reward—We don’t take additional risk unless we are compensated with additional return.
- Principle 5: Conflicts of Interest Cause Agency Problems—Conflicts of interest between owners and managers can create challenges for optimal efficiency and value creation in organizations.
- Learning Outcomes
- Identify business and financial risk and their measurement.
Discuss the relationship between operating, financial, and combined leverage.
Recognize the concept of an optimal capital structure.
- Calculate break-even points.
- Use the basic tools of capital structure management.
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