Family Business Advisory Services

May 30, 2017

Corporate Finance Basics for Directors and Shareholders

To craft an effective corporate strategy, management and directors must answer the three fundamental questions of corporate finance.

  1. The Capital Structure question:  What is the most efficient mix of capital?
  2. The Capital Budgeting question:  Which projects merit investment?
  3. The Dividend Policy question:  What mix of returns do shareholders desire?

These questions should not be viewed as the special preserve of the finance team.  To maintain a healthy governance culture, all directors and shareholders need to have a voice in how these long-term decisions are made.  This presentation is an example of the topics that we cover in education sessions with directors and shareholders.  The purpose of the presentation is to provide directors and shareholders with a conceptual framework and vocabulary to help contribute to answering the three fundamental questions.

Author
Travis W. Harms
President
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Is There Such a Thing as Too Much Cash in the Business?
Is There Such a Thing as Too Much Cash in the Business?

You Asked. We Answer.

Strong cash balances can be a strategic advantage, but only when they are tied to a clear purpose and reviewed regularly. The post argues that directors should treat excess cash as an active capital-allocation decision, not a passive default.
Are We Reinvesting for Growth — or Just Saying We Are?
Are We Reinvesting for Growth — or Just Saying We Are?

You Asked. We Answer.

Retaining earnings should be viewed as a capital allocation decision rather than an objective in itself. Directors and shareholders benefit when retained capital is tied to clear strategic initiatives, measurable returns, and transparent communication about expected outcomes.
WEBINAR: Complex Capital Structures in Transfer Tax Planning-A Valuation Perspective
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This program examines the increasing prevalence of complex capital structures in privately held businesses and the valuation challenges they present in gift, estate, and transfer tax planning.

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