Assignment Requirements
Assignment
American Superconductor
As you know from reading through the background materials, the decision to use debt or equity to raise money is not a decision taken lightly by management. So when several years ago, in 2003 American Superconductor decided to raise funds through equity it was definitely a major decision that required intense discussions at the highest levels of management.
Read the article below about American Superconductor and do some of your own research using internet search engines. You can also take a look at the official American Superconductor webpage.
Assignment Expectations
After doing your research, apply what you learned from the background materials and write a three Page paper answering the following questions:
What are the advantages and disadvantages for AMSC to forgo their debt financing and take on equity financing?
Do you agree with their decision?
How can a company’s cost of equity be determined?
Is there a tax deduction from the use of debt financing? Please explain.
Explain both of your answers thoroughly. Be sure to support your opinions on these assignment questions with references to the background materials or to other articles in your paper.
Read the article
American Superconductor switch ; Westboro company plans to raise money through a stock offering, Andi Esposito. Telegram & Gazette. Worcester, Mass.: Aug 26, 2003. pg. E.1
Abstract (Article Summary)
“AMSC’s management and board of directors believe the decision to forgo a secured debt financing and to adopt an equity financing strategy under current market conditions is in the best interests of our shareholders,” said Gregory J. Yurek, chief executive officer of AMSC. The 265-employee company has operations in Westboro and Devens and in Wisconsin.
Finally, the Northeast blackout “shined a lot of light on the problems we have been talking about as a company for three to four years,” Mr. Yurek said. AMSC products, such as a system installed this year in the aging Connecticut grid and high temperature superconductor power cables and other devices bought by China for its grid, are designed to improve the cost, efficiency and reliability of systems that generate, deliver and use electric power. “We are a company with products out there solving problems today,” he said.
Financial Managers
Introduction
Guide Options » Introduction | Working Conditions | Employment | Occupations |Training | Earnings | Outlook | Additional Sources
Key Points of Interest:
A bachelor’s degree in finance, accounting, or a related field is the minimum academic preparation, but many employers increasingly seek graduates with a master’s degree.
Employment will grow as the economy expands and increases the need for workers with financial expertise.
Almost every firm, government agency, and organization has one or more financial managers who oversee the preparation of financial reports, direct investment activities, and implement cash management strategies. As computers are increasingly used to record and organize data, many financial managers are spending more time developing strategies and implementing the long-term goals of their organization.
The duties of financial managers vary with their specific titles, which include controller, treasurer or finance officer, credit manager, cash manager, and risk and insurance manager. Controllers direct the preparation of financial reports that summarize and forecast the organization’s financial position, such as income statements, balance sheets, and analyses of future earnings or expenses. Controllers also are in charge of preparing special reports required by regulatory authorities. Often, controllers oversee the accounting, audit, and budget departments.Treasurers and finance officers direct the organization’s financial goals, objectives, and budgets. They oversee the investment of funds and manage associated risks, supervise cash management activities, execute capital-raising strategies to support a firm’s expansion, and deal with mergers and acquisitions. Credit managers oversee the firm’s issuance of credit. They establish credit-rating criteria, determine credit ceilings, and monitor the collections of past-due accounts. Managers specializing in international finance develop financial and accounting systems for the banking transactions of multinational organizations.
Cash managers monitor and control the flow of cash receipts and disbursements to meet the business and investment needs of the firm. For example, cashflow projections are needed to determine whether loans must be obtained to meet cash requirements or whether surplus cash should be invested in interest-bearing instruments.Risk and insurance managers oversee programs to minimize risks and losses that might arise from financial transactions and business operations undertaken by the institution. They also manage the organization’s insurance budget.
Financial institutions, such as commercial banks, savings and loan associations, credit unions, and mortgage and finance companies, employ additional financial managers who oversee various functions, such as lending, trusts, mortgages, and investments, or programs, including sales, operations, or electronic financial services. These managers may be required to solicit business, authorize loans, and direct the investment of funds, always adhering to Federal and State laws and regulations. (Chief financial officers and other executives are included with top executives elsewhere in the Handbook.)
Branch managers of financial institutions administer and manage all of the functions of a branch office, which may include hiring personnel, approving loans and lines of credit, establishing a rapport with the community to attract business, and assisting customers with account problems. Financial managers who work for financial institutions must keep abreast of the rapidly growing array of financial services and products.
In addition to the general duties described above, all financial managers perform tasks unique to their organization or industry. For example, government financial managers must be experts on the government appropriations and budgeting processes, whereas healthcare financial managers must be knowledgeable about issues surrounding healthcare financing. Moreover, financial managers must be aware of special tax laws and regulations that affect their industry.
Financial managers play an increasingly important role in mergers and consolidations, and in global expansion and related financing. These areas require extensive, specialized knowledge on the part of the financial manager to reduce risks and maximize profit. Financial managers increasingly are hired on a temporary basis to advise senior managers on these and other matters. In fact, some small firms contract out all accounting and financial functions to companies that provide these services.
The role of the financial manager, particularly in business, is changing in response to technological advances that have significantly reduced the amount of time it takes to produce financial reports. Financial managers now perform more data analysis and use it to offer senior managers ideas on how to maximize profits. They often work on teams, acting as business advisors to top management. Financial managers need to keep abreast of the latest computer technology in order to increase the efficiency of their firm’s financial operations.
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