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Nov 24, 2024

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FINGAME: TECHCO FINGAME: TECHCO Word Count: Reference Style: Student Name: Student ID:

FINGAME: TECHCO 1 Table of Contents 1. Capital Structure Decisions ................................................................................................ 2 2. Short-term vs. Long-term Debt Financing Decisions ......................................................... 2 3. Dividend Policy Decisions .................................................................................................. 3 Design Statement ....................................................................................................................... 3 References .................................................................................................................................. 4

FINGAME: TECHCO 2 1. Capital Structure Decisions The capital structure of Q3 is a mix of equity and debt in the ratio of 50:50. According to the financing decision pro-forma it can be observed that the equity consists of $500000 preferred shares and 200000 common shares @ $10 per share amounting to $2000000. The equity shares on the other hand, consist of short-term loans amounting to $200000, two-year loans amounting to $500000, three-year loans amounting to $800000, and ten-year bonds amounting to $1000000. The capital structure of Q4 is also a mix of equity and debt in the ratio of 50:50. The financing pro forma of Q4 highlights that the preferred shares are $500000 and there are 145000 common shares @ $10 per share amounting to $1450000. Moreover, the debt consists of $150000 short-term loans, $400000 two-year loans, $400000 three-year loans, and $1000000 ten-year bonds. Hence, the capital structure is a combination of both debt and equity and forms the capital structure of Techco. Capital structure plays a pivotal role in maximizing the capital of the company along with the long-term goals of any company. Therefore, capital structure is the ratio between the capital owned by Techco and the amount of borrowed capital. Hence, the correct use of capital structure can allow Techco to enhance the company’s capitalization and long-term goals of the company (Brusov, & Filatova, 2023). 2. Short-term vs. Long-term Debt Financing Decisions Based on the financing decisions it can be observed that in Q3 there were short-term loans amounting to $150000 that were less than one-year, $400000 two-year loans, and $400000 three-year loans, and $1000000 there is a debenture in the form of a ten-year bond. The total long-term liabilities of Techco are $3591666 and the total liabilities are $7325998. On the other hand, the total current liabilities consist of $3734332.

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FINGAME: TECHCO 3 In Q4, the short-term loan was $150000, the two-year loans were $400000, the three-year loans amounted to $400000, and the ten-year bonds amounted to $1000000. The total long- term liabilities of Techco in Q4 were $3991666 and the total liabilities were $8223830. The total current liabilities of Techco are $4232164. Therefore, the financial decisions of Techco company provide a piece of sound financial knowledge to amplify the risks and uncertainty of the company. There are both short-term and long-term debts that can be observed in the balance sheet of Techco. However, the higher the debt of the company, the higher the financial stress even during losses (Lusardi, Hasler, & Yakoboski, 2021). 3. Dividend Policy Decisions The dividend payout for both Q3 and Q4 is Nil. This is because it has been assumed that Techco has begun to issue shares from Q3 onwards and is expected to pay dividends to the shareholders in the next years. A dividend policy is the policy of the company that structures the company’s dividend payout. It structures the details about Techco payout when such dividend will be paid, and how much of profits will be distributed as dividends to the shareholders of Techco (Tayachi et al., 2023). Design Statement The tools used for developing the Q3 and Q4 financial decisions is the FinGame Online 5.0 software. Moreover, the tools used for obtaining results are the decision inputs software for entering the data, the simulation process for validating the entered data, and the proforma results used for generating the reports.

FINGAME: TECHCO 4 References Brusov, P., & Filatova, T. (2023). Capital structure theory: past, present, future. Mathematics , 11 (3), 616. Lusardi, A., Hasler, A., & Yakoboski, P. J. (2021). Building up financial literacy and financial resilience. Mind & Society , 20 , 181-187. Tayachi, T., Hunjra, A. I., Jones, K., Mehmood, R., & Al-Faryan, M. A. S. (2023). How does ownership structure affect the financing and dividend decisions of firm?. Journal of Financial Reporting and Accounting , 21 (3), 729-746.