DAMAC Properties Company Finance and Banking Needs
Companies usually develop the ways, in which they can manage their finances in a right way. It is important to have a clear plan for managing investment as well as banking needs of every company (Tirole, 2009). Thus, numerous challenges accompany the process of managing investment, especially for large enterprises. Proper management of financial matters as well as banking needs enables a company to make a rational decision when it comes to investing (Case, 2008). This study, while focusing on DAMAC Properties, attempts to explain the financial as well as the banking needs of the company.
The Companys History and Background in the UAE
DAMAC Properties is one the leading companies in the Middle East that has a massive investment in property development. DAMAC Properties was founded and registered in 2002, and it has its main headquarters in Dubai. In the previous years, the company extended its operations to other regions around the Middle East as well as the United Kingdom. In 2013, the London Stock Exchange listed DAMAC Properties based on a global depository receipts program. Since then, DAMAC Company has been trading its shares on the market, and its position is quite good. The company has built several structures that stand out as landmarks in different regions. As a way of expanding its activities due to its financial growth over the years, the company has shifted focus to building luxury golf course clubs, private apartments, and other commercial buildings such, as hotels, that have attracted interest among many groups of people. The special thing about DAMA Company is that it offers unique structures that are fully serviced to meet the needs of customers.
The Primary Functions of the Department
The Department of corporate involves a broad range of activities such as decisions and techniques that cover the management of a financial section of a company. Thus, DAMAC has a group of qualified personnel whose task is to work on improving the financial and banking requirements. Some of these personnel include financial advisers within the company. The group of individuals focuses on directing the firm on the best course of action to take, following a particular line of investment or transaction (Ross & Westerfield, 2012). The company also has lawyers who give legal advice concerning the areas where the company uses its finances. Lastly, the company has directors who implement the financial decisions that they are advised upon to facilitate corporate development.
The work of the financial department is indeed broad. The financial department of DAMAC includes variety of activities such as making appropriate capital investments decisions on behalf of the company. Capital investment decisions are concerned with whether it is viable for the company to implement a proposed investment plan (Case, 2008). It looks at how the company should pay for its equity or even debts and whether the DAMAC shareholders should be given dividends at the end of the financial year as well as how much they should receive. Capital investment of the company also looks at the best way of managing the companys current assets and liabilities. The current assets of the company include newly acquired funds or cash. Liabilities include payments such as salaries of workers as well tax among others. The capital investment makes the most of the biggest task of corporate finance (Spaulding, 2011). Thus, the manner, in which the leaders manage the company, is likely to have a huge business complication on the company. For instance, for DAMAC to have a strong financial position, it must consider building a strong base.
Corporate financing of DAMAC Company also focuses on managing debts and equity. The company previously borrowed finance from other banks to sustain its development before it fully picked up. In this connection, the company is responsible for managing its stock on the stock market. Again, financing should give the required capital to enable DAMAC to venture into other investments (Case, 2008). Providing short-term liquidity is important when it comes to managing short-term financial needs of the enterprise. According to Ross and Westerfield (2012), the corporate department of the company usually makes decisions on how it can manage its liability when such is due to avoid any penalty by law through state agencies.
The Main Products and Services Used by the Company
DAMAC Company mainly uses capital markets and private equity to manage its finance. Regarding capital market services, the company is registered on the London exchange security market. Through this, it can trade its shares that a person can buy or sell through banks, especially the Citi bank that the company uses as its depository bank. According to Wright and Giligan (2010), such strategies are used to promote an active shareholder relationship. In addition, the company can receive funding for its projects based on the bonds as well as giving them an opportunity to spread their source of finance. The company trades its security even with other non-banks in US Dollars. DAMAC Properties uses cheques when it comes to payment for the services as well as accepts cheques from other nonbank institutions. Wright and Giligan (2010) note that this ensures that the company can finalize its, business especially its development needs. Thus, banks usually assist the company in making even overdrafts. This enables DAMAC to write a cheque to the bank so that they could withdraw funds from their account up to a given level. This service allows the company to meet its agents financial requirements as it expands its investment (Ledenyov & Ledenyov, 2016).
Financial Needs of the Company
One of the financial needs of DAMAC Company is proper bookkeeping; it involves the ability of the company to have its records balanced regarding the value of assets and liabilities (Case, 2008). The company must focus on its value assert at the end of every financial year. Therefore, this allows them to show much they make regarding profits. For instance, the profit and loss statement show the companys revenue or cost incurred during a particular period. Tirole (2009) observes that from the bookkeeping record the company can be aware of its level of income so that they could know the amount of money to be used paid as tax. Bookkeeping also reveals the DAMAC cash flow statement. This kind of statement can show the companys money that comes in and goes out regarding making other payments. This statement is important, especially when it comes to determining how the company operates and areas that give it good profit.
The second most evident financial need of the company is fixed capital. According to Ledenyov and Ledenyov (2016), fixed capitals are the funds required in any organization to purchase fixed or long-term assets within a firm. This asset might include fixed or durable assets. For most companies, the fixed assets include buildings, land, machinery, and so on. The company will always require fixed capital for it to continue generating more income.
The third financial need of the company is the working capital. According to Plester (2014), the working capital is the money required for the purchase of current assets also known as short-term assets. The working capital is mainly used for the operations of the company. This might include machinery maintenance and repair, clearing wages and salaries, purchase of raw materials, and so on. Based on the nature of the business, working capital will always be required in ensuring that the day-to-day activities of the organization are not interfered with at any time.
Products and Services to Meet the Financial Needs of the Company
According to Plester (2014), the company requires auditing services annually to establish how it uses its resources. Verification is necessary for DAMAC, owing to its large size regarding assets and net capital. Auditing enables the company to identify utilization funds over a particular period on a particular project. Verification allows the reduction in any wastage since the company monitors how its funds are spent across the board. Professional auditors offer auditing services from the enterprise that is responsible for seeing that uses its finances in a responsible manner.
The company relies on financial forecasting of its future needs on finance. Predicting the companys needs in the future is important since it enables the company to view its position in the future on the market. This kind of service allows the company to know how it can deal with clients who walk away from home purchase plan because such actions affect the companys performance in the future (Ledenyov & Ledenyov, 2016). Forecasting also enables the company to identify regions that will give more profit to real estate.
DAMAC located in an oil-rich region; therefore, the prices of oil in the area also affect the capacity of the company to makes sales of its products. Consequently, this implies that knowing the future oil prices can determine the level of investments that the company should engage in. DAMAC is in a position to predict the ability to perform on the stock market based on the future predictions of the economic situation (Ledenyov & Ledenyov, 2016). Prediction of the future is mostly made by the companys financial forecasters. This group of people can do the analysis of the current economic situation through considering several variables that have the capacity to influence the companys need (Case, 2008). For instance, forecasting enables DAMAC Company to show how its shares will perform on the stock market; this is especially important when it comes to boasting the shareholder's confidence on the companys future.