Question

Hi, I am forecasting balance sheet for one company. My tasks is find out if they can balance. If they don't, I have to
find out what I can do to balance. For example, if there are more asset than liability, the company can pay dividends.
This is the question:

At this point, your forecast for the balance sheet will not balance. We now need to make financial policy decisions to
balance based on how you have forecast the business to perform over the 5 years. Financial policy actions include
items such as: issuing or retiring security( debt& equity), returning captial to shareholders via share repurchase or dividends,
increasing or decreasing financial assets to inculde cash& equivalent.

What I don't understand is bold sentence. Issuing or retiring secuiry and returing capital to shareholders via repurchase
If they issue more stock, it would help for stockholder's equity?
My issue is there are more asset than liability. I have to find out what financial poilcy action to balance the balance sheet.
Please help me. Thanks.

Answer 1

If the Asset is More than the Liability which means you need to have more Amount to funds these assets for which you need to issue the shares in order to raise the capital or else you need to raise the money by issuing debentures which comes interest cost or else take a loan.

And in case of Liability is more than the asset that Means you have excess Capital which needs to Reduced and it can be done by the repurchase of the share capital or else distributing dividend from the retained earnings. Even Debentures or loan balance can be reduced to balance.