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What are some of the most important financial management decisions? Can you provide some...

Question:

What are some of the most important financial management decisions?

Can you provide some real-life examples?

Finance Decision:

Finance decision is the crucial decisions to raise finance to the business. The finance decisions are taken by the financial manager associating to the finance mix in an organization. It involved with the borrowing and acquiring funds for an investment decision.

Answer and Explanation:

The following are the important financial management decision

  • Capital budgeting
  • Capital structure
  • Working capital management

The real-time examples of financial management decision are as follows

  • Capital budgeting: The finance manager decides about the payback period, accounting rate of return, net present value, internal rate of return etc.
  • Capital structure: A firm has $30 million in equity and $70 million in debt said to be 30%equity and 70%of debt-financed. The firm's ratio on debt to total financing, 70% in this example, is referred as the firm's leverage
  • Working capital management: It is the money needed to meet the day to day operations of the business and it includes cash, payment to suppliers, accounts receivable, debt management.

Learn more about this topic:

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Role of Financial Accounting in Management & Decision Making

from Accounting 201: Intermediate Accounting I

Chapter 12 / Lesson 1
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