Using Funding Methods

Accessing Funding Options

To access funding options, perform the following: From the Data grouping label, click Funding.

Setting Common Attributes for Funding Accounts

Use common attributes to identify funding account information before creating a Standard or Target Capital Structure Funding Method. You can identify certain advanced funding account attributes if the account is zero-based, or has an unlimited maximum, a minimum funding requirement (specify minimum), or a minimum change amount.

To set the Funding Option common attributes:

Access Funding Options.

See Accessing Funding Options.
In Funding Options, select Common tab.
In Funding Method to use, select Standard or Target Capital Structure.
Optional: Select Actual Override Defeats Funding to determine how ‘##’ overrides function during data entry:
- Deselected—‘##’ overrides the account maximum.
- Selected—‘##’ overrides the account balance.
Optional: In Type, click the cell to change the account type for related debt accounts:
- Term
- Revolving Debt
Optional: Select Zero Based for an account to be set to zero before the funding sequence begins.
Optional: Select No Maximum for an account to accept or fund with no cap or maximum.
Optional: Select Specify Minimum if an account to requires a time series of assumptions when the balance of the funding account should not go below. For example, certain compensating balances might be required by a lender in cash or securities.
Optional: In Minimum change, enter a minimum amount that the account must change to be part of the funding.

If the minimum change is not met, the account is not utilized funding surplus or deficit. The value that you enter should reflect the default currency of the file. For example, if the file is in Thousands of Dollars, a 10 reflects a minimum change of $10,000.
Depending on the Funding Method to Use option, perform an action:
- For Standard, see Using the Standard Funding Method.
- For Target Capital Structure, see Using the Target Capital Structure Funding Method.
Click OK.

Using the Standard Funding Method

The Standard funding method applies cash surpluses and funds cash deficits for funding accounts regardless of funding category (debt, preferred equity, or common equity) providing a unified funding priority plan across all funding account categories. You identify additional funding account characteristics and the funding of deficits or receiving cash surpluses.

Use the Funding Analysis Report, a summary of the study's capital structure, to review the results of your funding strategy.

To enter standard funding information:

Access Funding Options.

See Accessing Funding Options.

Ensure that Common information exists and Standard is selected in the Funding Method to Use field. See Setting Common Attributes for Funding Accounts.
In Funding Options, select Standard tab.
In Surplus column, select accounts providing cash. In Deficit column, select accounts receiving cash.

Note:

Some account settings may not be changed. For example, Excess Marketable Securities funds cash deficits to balance the forecast periods.

Apply Cash Surplus to and Fund Cash Deficit with columns display the order in which these accounts are processed. See Order of Repayment and Funding section.
Optional: Drag account names to reorder them.
Click OK.

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 Modeling calculates each category target level and applies surpluses to deficits in each category based on priority.

To enter Target Capital Structures:

Access Funding Options.

See Accessing Funding Options.

Ensure that Common information exists and Target Capital Structure is selected in the Funding Method to Use field. See Setting Common Attributes for Funding Accounts.
In Funding Options, select Target Capital Structure tab.
Select a funding account Category: Debt, Equity, or Preferred.

Note:

The Preferred option is not available unless you select the Allocate Preferred Separately option from Treatment of Preferred Stock.
In Treatment of Preferred Stock, select a method:
- 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 of Debt and Equity accounts.
- Allocate Preferred Separately, Overflow to Equity—Preferred accounts are independent of Debt and Equity accounts.
  
  Notice that the funding accounts for the category you selected are listed with the account number and type.
In Surplus column, select accounts providing cash. In Deficit column, 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.
Optional: Drag the account names to reorder them.

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