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Unit VI Corporate Restructuring And Contemporary Issues In Financial Management For Financial Management And Policy Mcom Sem 2 Delhi University Notes

Unit VI Corporate Restructuring And Contemporary Issues In Financial Management For Financial Management And Policy Mcom Sem 2 Delhi University Notes

Unit VI Corporate Restructuring And Contemporary Issues In Financial Management For Financial Management And Policy MCOM Sem 2 Delhi University : The University of Delhi (UOD) informally known as Delhi University (DU) is a public central collegiate university, located in New Delhi, India. The University of Delhi was established in 1922 as a unitary, teaching and residential university by an Act of the then Central Legislative Assembly of the British India. The University was originally to be named Prince Charles University, but Rai Kedarnath, counselor to the Chief Commissioner of Delhi and founder of Ramjas College, argued that if the university should fail, that would certainly antagonise the Prince. He suggested the name by which it is known today. Only four colleges existed in Delhi at the time: St. Stephen’s College founded in 1881, Hindu College founded in 1899, Zakir Husain Delhi College (then known as The Delhi College), founded in 1692 and Ramjas College founded in 1917, which were subsequently affiliated to the university. The university initially had two faculties (Arts and Science) and about 750 students.

Unit VI Corporate Restructuring And Contemporary Issues In Financial Management For Financial Management And Policy Mcom Sem 2 Delhi University Notes

Unit VI Corporate Restructuring And Contemporary Issues In Financial Management For Financial Management And Policy MCOM Sem 2 Delhi University : This paper serves the very purpose of defining the corporate restructuring as a financial strategy adopted towards the financial development and enhancement of an organization suffering from a major set back at any level of operation. Technological advancement and environmental or political – legal changes and polices enable the companies to move in the direction routed by the changing environment of the new era. There is a lot of competition in almost all respect as the there is not only the survival of the fittest but also the wittiest. In phase of rapid industrialization, only those organization will survive which will create and able to deliver the maximum value as satisfaction to their customers.

Unit VI Corporate Restructuring And Contemporary Issues In Financial Management For Financial Management And Policy Mcom Sem 2 Delhi University – The corporate restructuring, as the financial strategy, will make an effect on the overall cost of capital or will have an effort to bring it to the lowest so that the changes with respect to various operational and functional activities of the organization will be taken care of by the organizational changes. Corporate restructuring is one of the most complex and fundamental phenomena that management experiences. Each company has two opposing objectives from which it has to choose: to diversify or to refocus on its core business. Financial restructuring involves the redeployment of corporate assets through divestures of business lines that are considered peripherals of the core business strategy. Significant changes in corporate capital structure are termed as financial restructuring.

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The restructuring process can be divided into two broader parts as detailed below:

II.1 HARDWARE RESTRUCTURING It involves redefining, dismantling, or modification of the existing structure of the organization Identification of core competency Flattening of organization layer Downsizing Creation of self directed teams Benchmarking

II. 2 SOFTWARE RESTRUCTURING Communication Organizational Support Trust Stretch – liberating and energizing element of managerial context Empowering people Industry Foresight Training

III.0 REASONS FOR RESTRUCTURING 1

. Globalization of business caused restructuring because in this era only the lowest cost producers can survive.

2. Change in fiscal and government polices like deregulation/decontrol has led many companies to go for newer markets

3. Information technology motivates many companies to adopt new technology for technological advancement of the company.

4. Irrational divisionalisation of an organization into smaller units has been a cause for corporate restructuring.

5. Quality enhancement and cost reduction has necessitated downsizing of work force both at work and managerial levels.

6. Economic value of currency and foreign exchange rate implications

7. Focus on core business and to develop synergies has established restructured corporate.

8. To minimize the risk through diversification is also one of the reasons for corporate restructuring.

9. To write off loss and integration of sick unit into successful organization companies also go for restructuring.

10. The restructuring process will facilitates to have horizontal and vertical integration, thereby the competition is eliminated and the company can have access to regular raw material.

IV.0 FINANCIAL REORGANIZATION The term financial reorganization refers to the restructuring of company by affecting change in capital structure for achieving balanced operative results. The financial reorganization is resorted to bring balance in debts and equity funds, short term and long term financing, to achieve reduction in finance charges, to reduce lost of capital, to increase EPS, to improve market value of shares, to reduce the control of financieries on the management of company etc

IV.1 STEPS IN FINANCIAL REORGANIZATION IV.1.1 VALUATION OF BUSINESS Any business can be valued by taking into consideration the value of the assets of the organization and the earning power and the future growth of the organization .This growth or earning power is difficult to estimate accurately. .But to implement the plans of financial reorganization one may value the assets higher who have high liquidation value and can value lower to those assets who have lower liquidation value. Here liquidation dose not mean financial reorganization.

IV.1.2 FORMULATING OF NEW CAPITAL STRUCTURE In any of the capital structure whenever the proportion of equity is more to debt then there will be lower EPS. In time of prosperity and when the debts are more than equity then it will be very difficult to maintain an optimal capital due to high cost of debt. Therefore in order to maintain a proper balance in the capital structure financial reorganization is introduced. In financial organization the debt ratio can be reduced by reduction of fixed charge burden, by the introduction of new equity and preference share capital. When equity is more, the cost of servicing to equity will also be more which can be reduced by relying on debt whenever further funds are raised for expansion and diversification proposals. The company has to strengthen its financial position.

IV.1.3 EXCHANGE OF OLD SECURITIES FOR NEW SECURITIES In a scheme of financial reorganization old securities are valued at its worth and are exchanged for new securities with new obligations and rights. In order to mobilize funds, sometime old securities are also exchanged for new ones to meet the reorganized structure. The setting up of the new combination of equity, preference and debt in the financial organization, is an appropriate technique.

IV.2 FINANCIAL RECONSTRUCTION AND REORGANIZATION The financial reconstruction would be taken up when the firm is continuously making losses and the assets shown in the balance sheet is not representing its true worth because of accumulated losses. In this scheme, the capital amounts and the asset values are reduced to write off past losses as well as rearrange the capital structure of the business on a sound financial basis. As a part of financial reconstruction, sometimes a new company is specially formed to purchase the existing business, it is called as external reconstruction. When book value of capital and asset are reduced to write off past losses, it is referred to as internal reconstruction. But in case of financial reconstruction, the reconstruction schemes can be implemented to bring in more reality to improve the overall financial strength of the company by adjusting its gearing.

Unit VI Corporate Restructuring And Contemporary Issues In Financial Management For Financial Management And Policy MCOM Sem 2 Delhi University Notes

Unit VI Corporate Restructuring And Contemporary Issues In Financial Management For Financial Management And Policy MCOM Sem 2 Delhi University : Contemporary management/leadership issue. Discuss what is the most critical issue facing

Catalog Description: Prerequisite(s): Course Objectives: Study of topics recently published in financial management literature. The topics will be selected from international, corporate, and risk management topics and vary from term to term. FINA 6320 or equivalent Introduce students to advanced theories and practices used in financial management. Introduce students to the professional finance literature. Develop students’ abilities to analyze financial decisions and to communicate the results.

Current Textbook: Evaluation Process: Textbook and/or selected readings and other materials are the responsibility of the instructor of record and will be specified on a semester-by-semester basis in the course syllabus. Evaluation is the responsibility of the instructor of record and will be specified on a semester-by-semester basis in the course syllabus.

Unit VI Corporate Restructuring And Contemporary Issues In Financial Management For Financial Management And Policy Mcom Sem 2 Delhi University  -Course Curriculum Coordinator: Risk management Real asset pricing Valuation of the firm Ethics in corporate finance International financial management issues Dr. Prakash Pai

Unit VI Corporate Restructuring And Contemporary Issues In Financial Management For Financial Management And Policy MCOM Sem 2 Delhi University Notes

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