Structuring Corporate Financial Policy: Diagnosis of Problems and Evaluation of Strategies
15 Pages Posted: 21 Oct 2008 Last revised: 27 Nov 2018
This technical note presents an overview of the process by which an analyst could proceed to assess the financial policy of a firm. The note defines several dimensions of financial policy, offers three benchmarks against which to evaluate the policy, and reviews the FRICT framework with which to assess proposals for future financial policy.
Rev. Oct. 31, 2018
Structuring Corporate Financial Policy:
Diagnosis of Problems and Evaluation of Strategies
This note outlines a diagnostic and prescriptive way of thinking about corporate financial policy. Successful diagnosis and prescription depend heavily on thoughtful creativity and careful judgment, so the note presents no cookie-cutter solutions. Rather, it discusses the elements of good process and offers three basic stages in that process:
Description: The ability to describe a firm's financial policies (which have been chosen either explicitly or by default) is an essential foundation of diagnosis and prescription. Part I of this note defines “financial structure” and discusses the design elements by which a senior financial officer must make choices. This section illustrates the complexity of a firm's financial policies.
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Keywords: corporate financial policy, financial analysis, capital structure, strategic planning
Suggested Citation: Suggested Citation