Capital allocation – variable within the strategic intercession to determine the value
Supp/2007 , p 649..660
Author(s):
Monica Aureliana PETCU
Iulia DAVID SOBOLEVSCHI
Keywords:
Capital allotment, assets return rate, financial structure, capital average weighted cost, value indicators
Abstract:
Company’s viability is secured when it generates enough value for its owners, so that the risk undertaking should be justified as compared to other investment opportunities. The definition of the enterprise value as market value of economic assets, in counter-part with the market value of own capitals and of the financial debts, allows identifying and directing the analysis towards two managerial actions: investment projects selection, depending on their capacity of giving out value, and the choice of financial structure, based on the same view, generating value. The enterprise’s perception on the market is based on the return and risk requirements of investors secured by the performances of the actual assets, any insufficiency materializing in a financial sanction, that is the decrease of the enterprise’s value. The financing structure aims at reaching an optimum balance between various financing sources, the decisions in this field playing a determinate role in relation with the average weighted cost of the capital and of the value of an enterprise. The correlation between the enterprise’s ability of generating value and the enterprise’s capacity of sustaining its growth are variables of the financial strategic action.
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