Funding decisions

Authors

M.S., Dep. of Industrial Engineering, Amirkabir University of Technology, Tehran, Iran

Abstract

Funding decision is one of the financial strategic decisions of a corporation. There are also two other finan-cial strategic decisions that a corporation faces, the investment and the dividend decision. This paper de-scribes briefly the investment and the dividend decision, although its main focus is on funding decision. In de-scribing the funding decision the researchers will first explain the sources of funding in a corporation. Then, as funding decision is involved with determining the appropriate combination of the funding sources (debt, preferred stock, common stock, retained earnings), they will discuss about the debt equity ratio in different industries. After that they will describe the size and timing of corporate bond flotation and then they will present one model for corporate funding decision. Finally concentrating on the external sources of funding, they will discuss the funding decision in the perspective of determining optimal capital structure and will explain a mathematical programming model which can be used for determining the optimal capital structure.

Keywords