Topic: Financial Management Decisions
Managing finance well is the key to any organization and business venture, producing desired results and profitability. Managing your personal finances well also, will make a difference in your future financial success and well-being. We have studied in this course, that there are various rules that one needs to employ and are needed in order to achieve this objective. Whether you are starting your own business or managing your own personal finances, financial issues will have to be examined and understood and decisions will have to be made. If sound financial management principles are practiced as a result of a good understanding of basic finance before you start; our text suggests that decisions can be made wisely and you will not end up learning them the hard way.
This paper will focus on the strategic decisions made by financial management which are: Capital budgeting, Capital structure and Working capital management.
A detailed budget and a profit and loss statement are the prerequisites for any organization…a budget at the grass root level tells the organization their financial requirements for the coming year or for the next five years. Allocating funds is the key to efficient management of funds as allocating excess to one and providing fewer funds to another activity is sure to topple the apple cart. One tends to overlook the hidden costs, which a good budget is able to highlight. It is these hidden costs one overlooks and can result in tremendous pressure on the financial resources available to a company. Forecasting the cost involved in running the company in a detailed manner and then getting a picture of actual expenditure is essential to improve the financial management of an organization.
Our textbook defines capital budgeting as the process of planning and managing a firm’s long-term investments. The financial manager tries to identify investment opportunities that are...