1. Investment Decision:
A financial decision which is concerned with how the firm’s funds are invested in different assets is known as investment decision. Investment decision can be long-term or short-term.
A long term investment decision is called capital budgeting decisions which involve huge amounts of long term investments and are irreversible except at a huge cost. Short-term investment decisions are called working capital decisions, which affect day to day working of a business. It includes the decisions about the levels of cash, inventory and receivables.
2. Financing Decision:
A financial decision which is concerned with the amount of finance to be raised from various long term sources of funds like, equity shares, preference shares, debentures, bank loans etc. Is called financing decision. In other words, it is a decision on the ‘capital structure’ of the company.
FAQs
There are three types of financial decisions- investment, financing, and dividend. Managers take investment decisions regarding various securities, instruments, and assets. They take financing decisions to ensure regular and continuous financing of the organisations.
What are the 3 main financial decisions undertaken in a company? ›
When it comes to managing finances, there are three distinct aspects of decision-making or types of decisions that a company will take. These include an Investment Decision, Financing Decision, and Dividend Decision.
What are the two major decisions made by financial managers? ›
There are two fundamental types of financial decisions that the finance team needs to make in a business: investment and financing.
What is the best financial decision? ›
1. Save at least 25% of income. The earlier you start saving, the better. For example, someone who begins saving at age 25 does not have to save as much as someone who begins saving at age 35 (in terms of percentage of income) because the 25-year-old has more time to benefit from compounding interest.
What are the 4 types of decisions? ›
There are four decision-making styles, analytical, directive, conceptual, and behavioral. One of the keys to developing strong leadership is moving between decision-making styles to fit the situation and needs of the time.
What are the three major types of financial? ›
Finance can be divided broadly into three distinct categories: public finance, corporate finance, and personal finance. More recent subcategories of finance include social finance and behavioral finance.
What are the three business decisions? ›
There are three types of decision in business: strategic. tactical. operational.
What is financial decision-making? ›
Financial decision-making is a crucial aspect of business management. It involves choosing between available alternatives to achieve financial goals. From budgeting to investment choices, every decision impacts financial stability and growth.
What are the three types of financial management decisions for each type give an example of a business transaction that would relevant? ›
The three type of financial management decisions are investment decision, financing decision and dividend decision.
What are two major types of decisions in management? ›
Tactical and Strategic Decision-making
Strategic decision making is important because it helps organizations to establish a clear direction and make informed choices about resource allocation. Both tactical and strategic decision making are necessary for an organization to be successful.
Most financial decisions involve two related elements time and risk.
What are the three major decisions of the financial function include? ›
Answer and Explanation: The three functions are Investment, Financing, and Dividend distribution.
What are the three types of financial decisions? ›
There are three primary types of financial decisions that financial managers must make: investment decisions, financing decisions, and dividend decisions.
What is the biggest financial decision? ›
Your biggest money choices involve how much education you get, whether you marry and stay married, and whether you buy a home. Plenty of other factors influence your success, of course, and many are beyond your control.
What are the major financing decisions? ›
The financing decision comes from two sources from where the funds can be raised – first is from the company's own money, such as the share capital, retained earnings. Second is from borrowing funds from the outside the corporate in the form debenture, loan, bond, etc.
What are the 5 economic decisions? ›
Economic decisions involve production, distribution, exchange, consumption, saving, and investment of economic resources.
What are the four decisions of finance function? ›
They are critical in acquiring and managing financial resources and contributing to the productivity of other business functions, planning, and decision-making activities. Effective financial management involves various functions, including investment, dividend, financing, and liquidity decisions.
What are the basic financial decision-making? ›
The financial decision-making process involves identifying financial goals, gathering relevant information, analyzing data, developing alternative solutions, selecting the best strategy, implementing the chosen strategy, and monitoring and evaluating the decision.
What are 5 steps for making financial decision? ›
Plan your financial future in 5 steps
- Step 1: Assess your financial foothold. ...
- Step 2: Define your financial goals. ...
- Step 3: Research financial strategies. ...
- Step 4: Put your financial plan into action. ...
- Step 5: Monitor and evolve your financial plan.
