Question

In: Economics

How does the financial strength of an organization influence decision making and outcomes?

How does the financial strength of an organization influence decision making and outcomes?

Solutions

Expert Solution

The financial flexibility provides the foundation for every decision-making process and outcomes. This is because finance supports the activities of the business organization which require decision-making.

The organization does not function or even have a basis for a decision because it does not have the money or financial resources to sustain it.

Financial flexibility plays a key role in influencing an organization's decision. So, it's also a crucial component in shaping decision outcomes. Financial strength is determined by an organisation's resilience, solvency, and financial leverage. Thus, an entity with stable liquidity, solvency, and other essential ratios may be said to be financially healthy and improved.

If an company has enough cash with them so the organization's investment cycle won't explode. This is because the company is not going to have to rely on bank loans.

Thus an organization's financial strength benefits in decision taking and outcome; provides the funds required to be used in the strategic decision-making process.

Funds include the continuity of financial decisions for businesses.

Financial flexibility determines whether or not the chosen decision can be executed.

Financial strength is the driving force behind implementation to achieve the desired result.


The efficiency of a decision is often dictated by the financial strength or the available funds.


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