Explain how continuous reliance on debt financing will affect the return to the equity holders or shareholders of your company following the arguments of M&M proposition 2.
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The banking sector is a major source of debt finance for most companies in Ghana. The Bank of Ghana in 2017 embarked on a major financial sector clean-up in an attempt to build a more robust financial system in Ghana. The President his State of the Nation’s Address in January 2021, indicated that GH¢21billion was used in funding the cleaning up exercise. However, some believe that the financial sector clean-up is needless especially considering the amount of money involved in the clean-up. In a recent Board meeting of your company, the directors were divided as to whether to continue to rely on bank financing (debt) as a major source of financing. Some believe it is time to focus on equity financing as a major source of finance. This is because the license of Wele Bank Ghana Ltd, your bankers had been withdrawn during the financial sector clean-up. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors for consideration. Your proposal must address the following;
- Explain how continuous reliance on debt financing will affect the
return to the equity holders or shareholders of your company following the arguments of M&M proposition 2.
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- The banking sector is a major source of debt finance for most companies in Ghana. The Bank of Ghana in 2017 embarked on a major financial sector clean-up in an attempt to build a more robust financial system in Ghana. The President his State of the Nation’s Address in January 2021, indicated that GH¢21billion was used in funding the cleaning up exercise. However, some believe that the financial sector clean-up is needless especially considering the amount of money involved in the clean-up. In a recent Board meeting of your company, the directors were divided as to whether to continue to rely on bank financing (debt) as a major source of financing. Some believe it is time to focus on equity financing as a major source of finance. This is because the license of Wele Bank Ghana Ltd, your bankers had been withdrawn during the financial sector clean-up. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors for consideration. Your…The banking sector is a major source of debt finance for most companies in Ghana. The Bank of Ghana in 2017 embarked on a major financial sector clean-up in an attempt to build a more robust financial system in Ghana. The President his State of the Nation’s Address in January 2021, indicated that GH¢21billion was used in funding the cleaning up exercise. However, some believe that the financial sector clean-up is needless especially considering the amount of money involved in the clean-up. In a recent Board meeting of your company, the directors were divided as to whether to continue to rely on bank financing (debt) as a major source of financing. Some believe it is time to focus on equity financing as a major source of finance. This is because the license of Wele Bank Ghana Ltd, your bankers had been withdrawn during the financial sector clean-up. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors for consideration. Your…The banking sector is a major source of debt finance for most companies in Ghana. The Bank of Ghana in 2017 embarked on a major financial sector clean-up in an attempt to build a more robust financial system in Ghana. The President his State of the Nation’s Address in January 2021, indicated that GH¢21billion was used in funding the cleaning up exercise. However, some believe that the financial sector clean-up is needless especially considering the amount of money involved in the clean-up. In a recent Board meeting of your company, the directors were divided as to whether to continue to rely on bank financing (debt) as a major source of financing. Some believe it is time to focus on equity financing as a major source of finance. This is because the license of Wele Bank Ghana Ltd, your bankers had been withdrawn during the financial sector clean-up. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors for consideration. Your…
- The banking sector is a major source of debt finance for most companies in Ghana. The Bank of Ghana in 2017 embarked on a major financial sector clean-up in an attempt to build a more robust financial system in Ghana. The President his State of the Nation’s Address in January 2021, indicated that GH¢21billion was used in funding the cleaning up exercise. However, some believe that the financial sector clean-up is needless especially considering the amount of money involved in the clean-up. In a recent Board meeting of your company, the directors were divided as to whether to continue to rely on bank financing (debt) as a major source of financing. Some believe it is time to focus on equity financing as a major source of finance. This is because the license of Wele Bank Ghana Ltd, your bankers had been withdrawn during the financial sector clean-up. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors for consideration. Your…The banking sector is a major source of debt finance for most companies in Ghana. The Bank of Ghana in 2017 embarked on a major financial sector clean-up in an attempt to build a more robust financial system in Ghana. The President his State of the Nation’s Address in January 2021, indicated that GH¢21billion was used in funding the cleaning up exercise. However, some believe that the financial sector clean-up is needless especially considering the amount of money involved in the clean-up. In a recent Board meeting of your company, the directors were divided as to whether to continue to rely on bank financing (debt) as a major source of financing. Some believe it is time to focus on equity financing as a major source of finance. This is because the license of Wele Bank Ghana Ltd, your bankers had been withdrawn during the financial sector clean-up. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors for consideration. Your…The banking sector is a major source of debt finance for most companies in Ghana. The Bank of Ghana in 2017 embarked on a major financial sector clean-up in an attempt to build a more robust financial system in Ghana. The President his State of the Nation’s Address in January 2021, indicated that GH¢21billion was used in funding the cleaning up exercise. However, some believe that the financial sector clean-up is needless especially considering the amount of money involved in the clean-up. In a recent Board meeting of your company, the directors were divided as to whether to continue to rely on bank financing (debt) as a major source of financing. Some believe it is time to focus on equity financing as a major source of finance. This is because the license of Wele Bank Ghana Ltd, your bankers had been withdrawn during the financial sector clean-up. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors for consideration. Your…
- The Government of Ghana in an attempt to stimulate the Ghanaian economy after the COVID 19 pandemic has set aside GH¢600 million as a stimulus package for businesses. These stimulus packages are to be in the form of soft loans for businesses. However, some believe that these loans must be extended to firms in industries that are worst hit by the pandemic. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors of your company for consideration. Your proposal must address the following;i. The negative impact of the COVID 19 pandemic on the operations of your firm, justifying why your firm needs such a stimulus package? Your arguments should be situated within the industry within which you operate. ii. With your understanding of lessons on capital structure, which other four (4) factors should your firm consider before choosing this source of debt finance? iii. Discuss four (4) risks that your company is likely to be exposed to if it…The Government of Ghana in an attempt to stimulate the Ghanaian economy after the COVID 19 pandemic has set aside GH¢600 million as a stimulus package for businesses. These stimulus packages are to be in the form of soft loans for businesses. However, some believe that these loans must be extended to firms in industries that are worst hit by the pandemic. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors of your company for consideration. Your proposal must address the following; Explain how this decision will affect the return to the equity holders or shareholders of your company following the arguments of M&M proposition 2.The Government of Ghana in an attempt to stimulate the Ghanaian economy after the COVID 19 pandemic has set aside GH¢600 million as a stimulus package for businesses. These stimulus packages are to be in the form of soft loans for businesses. However, some believe that these loans must be extended to firms in industries that are worst hit by the pandemic. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors of your company for consideration. Your proposal must address the following; The negative impact of the COVID 19 pandemic on the operations of your firm, justifying why your firm needs such a stimulus package? Your arguments should be situated within the industry within which you operate. With your understanding of lessons on capital structure, which other four (4) factors should your firm consider before choosing this source of debt finance? Discuss four (4) risks that your company is likely to be exposed to if it goes ahead…
- There has been concerns among businesses that the recent reductions in the NIPR has not led to significant decreases in bank lending rates. What do you think could be accounting for this? What additional measures can policy-makers undertake to reduce the Cost of borrowing in the country?Last year, the Government of Ghana announced a new government policy dubbed Gold for Oil (G4O). The policy, as explained by the government, is to allow the government to pay for imported oil products with gold, in a direct barter with gold purchased by the Central Bank. The move, announced by the Vice President in the midst of the depreciation of the cedi against the US dollar and the rising cost of fuel prices, was explained as an intervention to help stabilise prices of fuel products, as well as reduce pressure on Ghana’s foreign exchange, as the direct gold barter would be the mode of paying for imported oil instead of depleting the foreign exchange reserve. The Gold for Oil programme has since been implemented. As Energy Expert Group with good understating of derivatives in the oil and gas market, discuss the Policy in the context of Derivatives. What is/are the derivative(s) being used?In recent times, the central Bank of Ghana has embarked on re-organization of the financial sector that among others has resulted in the increase in the minimum capital requirement to ₡400million Ghana cedis. This exercise led to the revocation of licenses from some universal banks. This was followed by a full report by the Bank of Ghana (herein after called “that BOG report”) regarding their basis for the revocation of licenses. A carful review of this report reveals a number of financial reporting and corporate governance lapses. You are required to compare your understanding of the salient elements of that BOG report to the Enron Case (see excerpts below) and answer the questions that follow: Excerpts from the Enron Corporate Scandal “Enron was one of the world’s leading electricity, natural gas, pulp, paper and communications firm based in Texas. Its claimed revenue was estimated to be $101bn. However, at the end of the 2001 it was revealed that its financial condition was…