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Three Types Of Financial Management Decisions

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The Financial Management Decision Process what are the three types of financial management decisions? For each type of decision, give an example of a business transaction that would be relevant.
The three financial management decisions are:
Capital Budgeting
Capital structure
Working capital management
Capital Budgeting: The process of planning mad managing a firm’s long term investments
The firm invests its fund in two types of assets – fixed and current. When the investment is regarding fixed assets it is called as capital budgeting decision. Factors that affect capital budgeting decisions are:
Cash flow of project : when a company invests huge amount on a investment project the proposal is to be assessed properly before investing
Return …show more content…

The investment into a project can be made from the owner’s funds and borrowed fund. How much should be invested from the owners funds and how much should be borrowed is to be decided. The cost of the finance sources with minimum cost is to be preferred and as more risk is associated with borrowed funds securities with moderate risk is preferred. Factors like cash flow position and high fixed operating costs also determine whether owner’s funds are to be used and how much money should be borrowed or should money be borrowed at all are …show more content…

Working capital management is where the financial decision maker looks after day to day operations in the company to ensure that sufficient funds for everyday operations are there. The type of decisions that are taken in working management capital are if any inventory should be added or sold, if credit can be given and or if any short term financing is required.
Example: modifying the firm's credit collection policy with its customers
The three decisions are capital budgeting, capital structure and working capital management.

Corporate Finance Organization in a large corporation, what are the two distinct groups that report to the chief financial officer? Which group is the focus of corporate finance?
The two distinct groups are the treasurer’s office and controller’s office that report directly to chief financial officer.
The controller’s office focus on tax managing, cost accounting management, financial accounting and data processing.
The treasurer’s office focus on corporate finance as it handles cash, credit, capital expenditures and financial planning of the

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