“Financial Management is based on three broad financial decisions.” Explain these decisions.

Three major decisions are:

(i) Investment Decision: It relates to how the firm’s funds are invested in different assets in the longterm and the short-term.

(ii) Financing Decision: It relates to the quantum of finance to be raised from various long-term sources. It determines the overall cost of capital and financial risk of the enterprise.

(iii) Dividend Decision: It relates to how much of the profit earned by the company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business.

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