Question

In: Finance

There are decisions that need to be taken by a financial manager. If you are a...

There are decisions that need to be taken by a financial manager. If you are a financial manager in a manufacturing firm that sells biscuits, please elaborate on what kind of decisions you will have to take in the company and give specific examples of the decisions

Solutions

Expert Solution

Financial Manager needs to take many important decision for the company. These decisios can be broadly classified into three categories. These categories are as follows:

1 Investment Decision:

  • Cash Flow related to the project: These cashflows are necessary to be determined by the financial manager inorder to determine the profitability of the project.
  • Risk associated to project: This is another major factor required by the management inorder to determine whether project should be taken or not.
  • Return of the project: Financial Manager helps to determine the return on the project by calculating IRR, NPVetc.

They compare various projects using ratios like cofficient of variation, Dividend/share,earnings/share inorder to decide which project should be taken and which one to reject.

2. Financing decisions: Financial Managers decides the source of funding/finance. Funds can be raised in the form of Owners Fund( Capital provided by the shareholders of the firm) and Borrowed funds(capital raised by issuing Bonds, taking loans, debentures, issuing stocks etc.).

3 Dividend Decision: This decision involves determining whether to distribute surplus funds to the owners of the company(creditors, share holders) or to invest in the company for growth oppurtunities.


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