Question

What are the financial decisions?

Hint:

Financial decisions focus on investment, financing, and dividend policies of a business.

Answer 1

Financial decisions refer to the decisions taken by a business regarding the management of its funds and financial resources.
These decisions are very important because they directly affect the profitability, liquidity, and long-term stability of the business.
Financial decisions mainly involve deciding how funds should be raised, invested, and distributed within the organization.
Such decisions are taken by the financial managers after carefully analyzing the risk, cost, and expected returns.
Financial decisions can broadly be classified into three main types:
Investment decisions, which deal with how funds are invested in different assets like machinery, buildings, or projects.
Financing decisions, which relate to choosing the sources of funds such as equity shares, debentures, loans, or retained earnings.
Dividend decisions, which involve deciding how much profit should be distributed to shareholders and how much should be retained in the business.
Thus, financial decisions help in the efficient utilization of financial resources and ensure the smooth functioning and growth of the business.