Financial Decision Making

There are four important and major decisions that a financial managers confronts. This modern approach of financial management offers an analytical framework as well as a conceptual framework for the purpose of financial decisions, the four key important and major decisions are as under:

1. Financial Decisions

2. Dividend Decisions

3. Investment Decisions and finally

4. Financial Analysis and in addition to that planning and control related decisions.

Financial Decisions: A financial managers has to make decisions related to estimation in regards to capital requirements of an organization which will mainly depend upon expected costs and profits and also the manager has to keep in mind the future programs, policies. There should always be adequacy while estimations are made which as a result will increase earning capacity of the company.

A financial manager also needs to take decisions related to capital structure which involves short and long terms debt equity analysis and solely depends on proportion of equity that an organization possesses and also funds to be raised from outside parties.

Manger has to go with different options and has the choice while raising additional funds. The choices include issuing of shares and debentures, bank loans and loans from financial institutions. The next step that a financial manager has to take is investment of these funds which he/she needs to be very careful with and should allocate funds into ventures that can bring profit to the organization and there is safety on investment and regular returns are made possible. The net profit decisions are also made by financial manager by declaration of dividend and retaining of profits. The declaration of dividend includes the identification of rate of dividends and benefits such as bonus and in retained profits the manager has to decide about the volume which again depends upon expansion, diversification plans and innovational plans of the company.

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