1.5.4 Finance

Your Finance Department makes sure your company does not run out of money. While it is possible to fund activities entirely from operations, it is unlikely to happen in the early years. The company will need to turn to the capital markets. The company has two outside sources of money (stock issues are not permitted):

• Current Debt (These are one year bank notes.)
• Bonds (These are 10 year notes.)

Other Finance Department activities include:

• Issuing Dividends (Reduces retained earnings and increases leverage.)
• Retiring Stock (The company can buy back stock to reduce shares outstanding.)
• Retiring Bonds (The company can retire bonds before they come due.)
• Determining accounts payable and accounts receivable policies

If the company runs out of money during the year, emergency loans are issued by a lender of last resort, affectionately known as Big Al. Big Al will automatically keep the company afloat with a loan for the needed amount. Big Al charges a 7.5% penalty in addition to the company’s current debt rate. Emergency loans convert to current debt at the beginning of the following year. Emergency loans will lower your stock price.