Professional Documents
Culture Documents
Treasurer Controller
Financial
Capital
Pension Corporate Accounting
Expenditure Fund Accounting Manager
Manager Manager Manager
The Investment Decision
The investment decision relates to the selection
of assets in which funds will be invested by a firm.
The assets which can be acquired fall into two broad
categories
Long term assets (which yield return over a period over a time in
future.) –Capital Budgeting.
Short term or current assets (convertible into cash usually within
one year.) –Working Capital Management.
•Capital Budgeting
Capital budgeting is the most crucial financial decision
of the firm. It refers to selection of an asset or investment
proposal or course of action whose benefits are likely to be
available in future over the lifetime of the project. The main
elements of capital budgeting are:
Choice of the new assets out of the alternatives available or
relocation of the capital when an existing asset fails to justify
the funds committed.
Capital budgeting decision is the analysis of risk and
uncertainty.
The concept and measurement of cost of capital.
•Working Capital Management (wcm)
WCM is concerned with the management of current
assets. The key strategies and considerations in ensuring a
tradeoff between profitability and liquidity is one of the
major dimensions of WCM. The management of working
capital has two basic ingredients:
An overview of working capital management as a
whole
Efficient management of the individual current
assets such as cash, receivables and inventory.
The Financing Decision
The investment decision is broadly
concerned with the assets–mix or the composition
of the assets of the firm. A capital structure with a
reasonable proportion of debt and equity capital is
called the Optimal Capital Structure. The two
aspects of financing decision are :
The of capital structure theory
The capital structure decision
The Dividend Decision
The dividend should be analysed in relation to the
financing decision of the firm. Two alternatives are
available in dealing with the profits of a firm:
They can be distributed to the shareholders in the form of the
dividends
They can be retained in the business itself.