Financial decisions are concerned with how to raise the funds for business activities from various sources. There are two sources of raising finance to the business they are Debt and Equity. The owner fund or shareholders fund are called equity. The harrowed funds are called debts.
The Financial Management decisions can be broadly classified into:
1. Investment decisions: Investment decisions are concerned with how a firm’s funds are invested in different assets either long term or short term. The long term investment decisions are also called as Capital Budgeting Decision and the short term investment decisions are called as Working Capital Decisions.
2. Financing decision: Financing decisions are concerned with how to raise the funds for business activities from various sources. There are two sources of raising finance to the business they are Debt and Equity. The owner fund or shareholders fund are called equity. The harrowed funds are called debts
3. The dividend decision: Dividend decisions are concerned with the apportionment of the firm’s profit. Dividends are the portions of the profit which will be distributed to the shareholders. The portion of profit which is undistributed to the shareholders are called as retained earnings which will be utilized for expansion and development of the business.
