Using the Target Capital Structure Funding Method

The Target Capital Structure Funding Method applies cash surpluses by funding accounts category: debt, equity, and preferred. You can create target level and prioritize the order of funding categories (for example, target debt-to-total capital). Strategic Finance calculates each category target level, and applies surpluses to deficits in each category based on ordered priority.

  To entering Target Capital Structures:

  1. Access Funding Options.

    See Accessing Funding Options.

    Ensure that Common information exists and Standard is selected in the Funding Method to Use field. See Using the Standard Funding Method.

  2. Select Target Capital Structure.

  3. Select a funding account Category :

    • Debt

    • Equity

    • Preferred

      The Preferred option is not available unless an Allocate Preferred Separately option is selected under Treatment of Preferred Stock.

  4. In Treatment of Preferred Stock, select a method of treating preferred stock:

    • Allocate Preferred as Debt—All preferred accounts are debt. Preferred is unavailable.

    • Allocate Preferred as Equity—All preferred accounts are equity. Preferred is unavailable.

    • Allocate Preferred Separately, Overflow to Debt—Preferred accounts are independent from the Debt and Equity accounts.

    • Allocate Preferred Separately, Overflow to Equity—Preferred accounts are independent from the Debt and Equity accounts.

      Notice that the funding accounts for the category you selected are listed with the account number and type.

  5. Under Surplus select accounts providing cash, and under Deficit, select accounts receiving cash.

    Some accounts may not be included in the funding lists. For example, Term Debt cannot be used in the funding lists as a source of funding.

  6. Optional: Click and drag on the account names to reorder.

    Apply Surplus in Category to... and Fund Deficit in Category with... display the order in which these accounts are processed. See Order of Repayment and Funding.

  7. Click OK.