Financial Portfolio Strategy: Application to College of Southwest

Grace S. Thomson, Nevada State College

Abstract

Financial Portfolio Strategy Creating value in the organization is the cornerstone of business activity. Value-creation is a concept that has evolved for the past fifty years, stimulating the generation of theories, techniques, models and institutions (Slater and Zwirlein, 1996). Financial markets have developed in response to the dynamic corporate activity, providing different options of financing and investment. Financial decision-making at the executive level becomes critical in the creation of wealth in the organization, and the financial strategies designed by the Top Management Team (TMT) are expected to seek beyond profit maximization (Lankau et al, 2007; Myers, 2001). However, there are a large number of endogenous and exogenous factors that affect the performance of the firm that need to be taken into consideration when defining those strategies (Dagiliene, 2007). This document is based on the review of an extensive body of theory around value creation and financial strategies. This research uses the work of Bhalla (2004), Dagiliene (2007) and Slater and Zwirlein (1996) for the preparation of the portfolio; and the works of Jensen (2001), Myers (2004), Fama and French (1965), Miller and Modigliani (1958), and Merton (2004) for the pertinent theories. To set the background of the study, the researcher includes brief information about the institution at the beginning of the document, and an elaboration of the strategies and specific portfolio in the last section of this paper. The purpose of this research is to determine an optimal portfolio that responds to financial strategies defined by a higher-education institution for the upcoming year, based on assumptions that will be explained in the body of the document.