Financial engineering to enhance shareholder value

The expenditure of capital has effects on the valuation of the company and depends on the category of the capital expenditure the company is spending. Notably, the capital expenditure is useful in ensuring the company value is maintained and there is enhanced growth and productivity. When a large portion of the capital expenditure is used to maintain production and enhance profitability with a higher maintenance costs, the firm typically has lower valuation compared to a company that does not have the high annual maintenance costs. On the other hand, when a firm has lower maintenance costs, the capital expenditure can be used to enhance the revenue and productivity. However, in spite of how the capital expenditure is used it is reported as expenditure in the income statement and is calculated as percentage of the annual revenue which may potentially reduce the profit for the financial year as well as negatively affect the valuation of the company.

The shareholder value is delivered to the owners of the entity because the management is able to enhance the sales and earnings as well as the free cash flows over a period. Therefore, company can enhance the dividends and encourage capital gains for the equity owners. The shareholder value depends on the strategic decisions made by the senior managers and board. This includes the ability of the board to make wise investment decisions and generate healthy financial returns on the capital invested. The share price increases when the value is created over a long period and the dividends paid to shareholders are equally increased. The number of sales that Titan Company can generate using the currently available assets influences the shareholder value created by the business.

Therefore, companies are more valuable when they can increase the earning with the current assets available at its disposal. In addition, cash flow is also known to increase the value of a company. It is essential to generate sufficient cash inflows to ensure that business operation is consistent. This is because, the company is able to operate and enhance its sales without the need of borrowing or issue more stocks. Moreover, there is need to assess the risks as to why certain anticipated performance cannot be achieved. Financial Statements and Ratio Analysis Titan Company Ltd a global company majoring in the manufacture of wrist watch and is based in India. The firm manufactures jewelry, watches, and the precision engineering and eye wear.

The main brand names traded by the company include Titan, Fastrack, Nebula, RAGA, Regalia, Octane, and Xylys. Researchers believe that the financial success of a company is usually an outcome of cognitive psychology. 4 PAT Margin 6. 8 Return on Average Equity   27. 6             Operating Cash Flow to Revenue -5. 3 Liquidity Current Ratio 1. 76 Solvency Total Debt to Equity 0. d. The Best Strategies to Gain the Most Optimal Performance In order to gain the optimal value for Titan Company, it is essential to separate the ownership and management. The creation of shareholder value is largely impacted by the managers because they are responsible for the day-to-day running of the company. However, there is a higher risk that the managers may never make decisions that have the best interests of shareholders.

In order to ensure optimal performance on the strategies, I recommend that proper safeguards against corporate governance codes and ethical standards. This will ensure that the investment decisions made by managers and workers are in the best interest of the shareholders. Financing of Recommendations From the analysis of financial statements and ratios, we have seen that the revenue of the company is high and allows investors to leverage on these available funds to enhance returns. WACC and capital structure will be affected because expense on investment will be increased while enhancing the long-term value of the company. Moreover, the intellectual assets within the company will ensure that there are effective strategies to enhance the long-term value of shareholders. Titan Company does not require external funding because the financial performance is health and there are numerous funds at its disposal to support diverse investments that will enhance the value of shareholders.