The Debt Investment Procedure helps receive maximum return and benefit from surplus funds while minimizing risks and costs. The procedure reduces overall cost of capital in pursuing business plans and strategies. It applies to the Finance Department and to Top management who are responsible for establishing guidelines to manage surplus funds and create acceptable criteria for investment vehicles. (10 pages, 1299 words)
Debt Investment Responsibilities:
The CFO (Chief Financial Officer) is responsible for overseeing surplus funds investing and debt pay down.
Top Management and the Board of Directors are responsible for reviewing and approving.
Debt Investment Definitions:
Surplus Funds – Profits and/or cash flow not needed for working capital, or part of cash management accounts (also called excess cash); should be invested for future use, used to pay debt, or distributed to shareholders.
Net Present Value – Used to analyze the profitability of an investment or project. The present value of an investment’s future net cash flow minus the initial investment.
Weighted Average Cost of Capital (WACC) – Overall return that a corporation must earn on existing assets and business operations in order to increase or maintain its current value.
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