Financial management is based on three broad financial decisions. What are these? (2024)

FAQs

Financial management is based on three broad financial decisions. What are these? ›

There are three primary types of financial decisions that financial managers must make: investment decisions, financing decisions, and dividend decisions.

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.

There are three broad areas of financial decision making – capital budgeting, capital structure and working capital management.

The key elements of financial management identified in the paper are planning, budgeting, forecasting, and monitoring.

Finance functions cover Investment (allocating funds to assets for growth), Dividend (deciding on profit distribution to shareholders), Financing (raising capital through equity or debt), and Liquidity (ensuring sufficient cash flow for operations).

What is the Financing Decision? The Financing Decision is a crucial decision that is to be made by the financial manager, the decision is about the financing-mix of an organization. Financing Decision is focused on the borrowing and allocation of funds required for the investment decisions of the firm.

Financial Management is the process of planning and managing the Finances of an individual or organisation to achieve its goals and objectives. It involves optimising shareholder value, generating profit, reducing risk, and ensuring financial health from both short-term and long-term perspectives.

It focuses on managing cash flow and controlling spending. On the other hand, a financial plan is a broader strategic roadmap encompassing long-term financial goals, investment strategies, risk management, and retirement planning.

What are the four main areas of finance? ›

There are four main areas of finance: banks, institutions, public accounting and corporate. Courses within the finance major provide a solid background in many subjects including: Financial markets and intermediaries. Measuring the risk and return of investments.

Management usually must make decisions on where to allocate resources, capital, and labor hours. Capital budgeting is important in this process, as it outlines the expectations for a project.

The third primary decision when making financial choices, after spending and saving, is investing. Investment decisions entail determining how to allocate one's savings among various forms of financial opportunities.

The financial manager's most important job is to make the firm's investment decisions. This, also known as capital budgeting, is the most important job for this type of manager.