Richard 's Family Financial Management Decision Essay

Richard 's Family Financial Management Decision Essay

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Richard’s family financial management decision involved capital budgeting in running the farm. This is because Richard decided to focus on investing in new products that can make the farm to better their performance. One of the capital budgeting objectives is increase resources through proper allocation of resources. Richard decided to introduce a new product and sell it during a festive season. He later invested heavily in it when he realized its potential. He bought and leased farming machinery to ease farming. It also involved the working capital management since it considered increasing the income and being able to meet the expenses of the farm. The decision ensured that the farm is handling its operations. The decision made by Richard also involved capital structure since they included the way they financed their operations in various methods such as funding from the sale of previous farming and from bank loans as well as leasing.
Richard’s family should use one of the hybrid forms of the corporation since it’s a family owned business and its shareholders are members of the family. They should consider using the S corporation since it basically has very few shareholders. This is because they will maintain the control of the business in the family. In case they extended shares to other investors, they have to ensure that they keep the majority shares to be sure of control of their business decision making . This family business has about three shareholders and that’s why they should use S corporation business model. This makes the farm create a chance for their children to be incorporated in the business in the future. On the other hand, this business has one class of products. Richard farm is a family business and double ta...

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...higher farm value which will lead to a higher selling price of each share to the public. Therefore, hiring professionals and acquiring assets will make the farm expand and acquire higher equity capital.
In conclusion, the financial decision involved the capital budgeting, structure and the working capital management in planning how the farm will run its tree business. The farm should consider using S corporation to acquire equity capital. This will help in expanding the business. Incorporating the business may also give the children a chance to be shareholders who can later distribute their parent’s shares according to the set law of share transfer upon their parent’s death. Hiring professionals is an important approach to the farm since it will increase its value which can attract investors. Incorporation will differentiate management and ownership of the company.

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