Roles of a Chief Financial Officer (CFO)
Part A – Suppose you are a Chief Financial Officer (CFO) of a UK based listed company. The company is currently trading at £10 per share and 10 million shares in issue. The total market value of the issued share capital of the company is £100 million.
You have been requested to write a report to the board of directors with respect to raising an additional funding of £50 million to enable the next stage of development of international projects to be carried out.
Note 1:
For the report in Part A, it should critically review the advantages and disadvantages of the main funding options and have many appropriate academic references to strengthen your discussion. Further, your report should form the basis for a discussion at the next board meeting. In particular, you are required to include the different financing choices
available through the equity and debt markets.
Part B – This additional funding will allow the business to become more global with the opportunity to develop a market in numerous countries with payment being made in the local currency. The directors are conservative in their attitude to risk. You have been requested to provide a report to the directors critically evaluating alternative derivatives
including forwards, futures, options and swaps that are available in the market in order to minimise the risk with respect to payment in international currencies.
Note 2:
For the report in Part B, it should critically discuss and compare the use of derivatives
including forwards, futures, options and swaps to hedge Foreign Exchange (FX) Risk.
With reference to appropriate academic references, discussions must include:
- how it works in mitigating FX risk
- advantages and disadvantages of each type derivative in managing FX risk
You are expected to link the reports for Parts A and B together in the form of a single essay.The essay must be around 4,000 words Parts A and B are expected to be equally weighted, i.e., around 2,000 words for each part.
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