Financial analysis of a business is an important part tool in the decision making process by...

Financial analysis of a business is an important part tool in the decision making process by the management of a company. Identify and discuss the types of decisions that management may develop from financial analysis.

Expert Solution

Some of the decisions that the management may develop from financial analysis are:

1. Investment decisions: These decisions are primarily focused on making new investments in the business , the cash flows and profits that are expected to be generated. These are taken through a process known as capital budgeting.

2. Dividend decisions: The dividend decisions involve deciding the dividend payout ratio and retained earnings that the company needs for future.

3. Financing decisions: This involves decisions regarding the source of funds through which the company will be financed i.e. weighing options between equity and debt and weighted average cost of capital.

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