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endobj The finance manager has to assess the profitability of various projects before committing the funds. It can help with decisions on budgets, debt, and investing.

If you are at an office or shared network, you can ask the network administrator to run a scan across the network looking for misconfigured or infected devices. The firm should also consider the question of dividend stability, stock dividend (bonus shares) and cash dividend. << Practically, this function involves the decision of the firm to commit its funds in long-term assets together with other profitable activities. These decisions are relatively more important because of the following reasons: These decisions are concerned with long-term assets.

With this perspective, we revisit Capital Structure. >> Generally, investment decisions fall under two broad categories: (ii) Investment in outside business, i.e., in securities and other companies.

6 0 obj Generally, two well-known classifications may be mentioned below: (ii) Investment in Current Assets (Working Capital).

/Parent 2 0 R Learn and Understand, The Factors Influencing and Importance of Financial Decisions! xڝXˎ,5���]7��Z�@�;����nz��+~?�$US=�0�RWDZ�퓤�o�_��%ÒS]K]n_��_�/?�ŇC���x�kIi9E��X����g��O��չ�/'̑z�w��.$�X�Z�F#Ź������U�1D�"�'�GzS�������ˁ5�3e���\��AWZ9%}�Y����������F0k��@�Dr0ݧA�� +����{�BF����Z]�����@�n �� �f��pUG��.b�$ܭ�^�k�W���_�L6/��,�͂5U\N�㚽�'. Once the firm has taken the investment decision and committed itself to new investment, it must decide the best means of financing these commitments. >> /Im1 64 0 R

If the capital structure is able to minimise the risk and raise the profitability then the market prices of the shares will go up maximising the wealth of shareholders.

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<< Besides, limited financial resources leads to a firm considering the alternative courses of action, viz.. i.

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Financial decision-making.

The two most common implements used for this purpose are Real Options Analysis and Decision Tree Analysis. Image Guidelines 5. Fixed assets (e.g., Land and building. /Type /Page Disclaimer 8. Prohibited Content 3.

Management, Financial Management, Financial Decisions. /MediaBox [0.0 0.0 595.0 842.0] The higher rate of dividend may raise the market price of shares and thus, maximise the wealth of shareholders.

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It also needs to comprehend some other nuances of these projects like: Size endobj

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Hence, the financing decisions are of utmost importance as proper financing decisions help the business entities to attain their monetary goals. /Type /Page /Creator Since funds involve cost and are available in a limited quantity, its proper utilisation is very necessary to achieve the goal of wealth maximisation. Privacy Policy 9. /Kids [3 0 R 5 0 R 6 0 R 7 0 R 8 0 R 9 0 R 10 0 R 11 0 R 12 0 R 13 0 R The investment proposals should be evaluated in terms of expected profitability, costs involved and the risks associated with the projects. << (iii) Estimates and schedules are made for approved capital projects, and so on. /Type /Page In doing so, heavy loss will have to be incurred.

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Short-term investment decision, on the other hand, relates to the allocation of funds as among cash and equivalents, receivables and inventories. Buying— as an alternative to manufacturing. 11 0 obj

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endobj The companies need to take financing decisions that help them to build and maintain a substantial economic value.

The key aspects of financial decision-making relate to investment, financing dividends and asset management. Timing

/CropBox [0.0 0.0 595.0 842.0] Importance of the Balance Sheet. /Rotate 0

are acquired not for sale and they are usually owned They help to continue the production function for goods and services in order to earn revenues.

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The values of invested capital can, no doubt, be affected due to the following factors: (i) Advancement in technology leads to an improved and efficient machine which may prove existing machineries worthless; or.

If you are on a personal connection, like at home, you can run an anti-virus scan on your device to make sure it is not infected with malware.

Investment decisions 2. Financing decisions 3. Dividend decisions. The types are: 1. 31 0 obj

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/Type /Page Report a Violation 10.

While taking this decision financial manager has to take special precautions.

endobj Large amount of capital is invested in these assets. The raising of more debts will involve fixed interest liability and dependence upon outsiders.

Disclaimer 9.

<< While taking this decision financial manager has to take special precautions. <<

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>> Capital budgeting decisions are full of risk. << Decisions regarding fixed assets are included in the preview of capital budgeting. /Type /Page /Parent 2 0 R Rental — as an alternative to ownership; ii. The investment decisions are an important part of the various decisions taken by a corporate entity. << /MediaBox [0.0 0.0 595.0 842.0] /Contents 49 0 R /Parent 2 0 R >> /Contents 59 0 R

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The primary purpose, of course, of investment funds in business assets is to produce future economic benefits in such a manner which will cover not only the cost of capital and operating expenses but also will leave a sufficient margin in order to cover the risk which is involved in it.

>> << /MediaBox [0.0 0.0 595.0 842.0] Content Filtration 6. For example, investments must be financed in some way, however, there are always financing alternatives that can be considered. >> /CropBox [0.0 0.0 595.0 842.0] << /Contents 46 0 R << /Keywords A sound short-term investment decision or working capital management policy is one which ensures higher profitability, proper liquidity and sound structural health of the organisation.

Huge Collection of Essays, Research Papers and Articles on Business Management shared by visitors and users like you. The term dividend refers to that part of profits of a company which is distributed by it among its shareholders. The dividend decision is concerned with the quantum of profits to be distributed among shareholders. These are expenditures, the benefits of which are expected to be received over a long period of time exceeding one year. It is generally presumed that equity financing is a better option than debt financing. It is the most important financial decision. Essays, Research Papers and Articles on Business Management, Meaning and Types of Dividend Policy | Financial Management, Financial Management: Meaning, Importance and Role, Essay on Financial Management: Objectives, Scope and Functions, How to Implement the CRM Project?

<<

Definition: The Financing Decision is yet another crucial decision made by the financial manager relating to the financing-mix of an organization.

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/Contents 45 0 R Investment Decisions: Investment Decision relates to the determination of total amount of assets to be held in the firm, the composition of these assets and the business risk complexions of the firm as perceived by its investors. /Type /Catalog The investment decision is important not only for the setting up of new units but also for the expansion of present units, replacement of permanent assets, research and development project costs, and reallocation of funds, in case, investments made earlier do not fetch result as anticipated earlier.

It is the reward of shareholders for investments made by them in the share capital of the company. /Type /Page

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<< (iv) Investments made in ‘Receivables’ may prove bad and irrecoverable and so on. /Parent 2 0 R Before publishing your articles on this site, please read the following pages: 1.

23 0 obj It is concerned with the borrowing and allocation of funds required for the investment decisions. The debt-equity ratio should be fixed in such a way that it helps in maximising the profitability of the concern.

There are two reasons for it. However, the decisions of the firm to invest funds in long-term assets needs considerable importance as the same tends to influence the firm’s wealth, size, growth and also affects the business risk.

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/Rotate 0 /Parent 2 0 R Fin… We all know that the primary sources of supplying capital are: It is also known to us that there is a cost of capital in all types of capital investment in the business Therefore, investment in own business is justified only when the return for the same will be at least equal to the estimated return resulting from the investment by way of relevant cost of capital.

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5 0 obj /Resources 35 0 R >> The ones who take the important decisions in a corporate entity have to choose between giving priority to either the financing decisions or the investment decisions.

/Contents 42 0 R Disclaimer 8.

24 0 obj Being within the responsibility of the project sponsor, there is no doubt, however, of the importance that financing has to the project.

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The companies need to take financing decisions that help them to build and maintain a substantial economic value.

endobj Certainty of cash flows in the future /Parent 2 0 R /Filter /FlateDecode Copyright 10. /MediaBox [0.0 0.0 595.0 842.0] <<

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Profit is earned by selling the goods so produced.

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