Financial Management

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Finacial Decision means the selection of best financing alternative or best investment alternative. Financial decision-making is concerned with three broad decisions: (i) Investment Decision  (ii) Financing Decision (iii) Dividend Decision

Dividend Decision: It refers decisions related to the amount of profit to be distributed among shareholders and amount of profit to be retained in the business for financing. 
Some of the important factors affecting dividend decision:

1. Amount of earnings.
2. Stability of earnings.
3. Cash Flow Position.
4. Taxation Policy.

Financing Decision: It deals with the determination of sources of finance, amount to be raised from each source.
Some of the important factors affecting financing decision:

1. Cost.
2. Risk.
3. Floatation cost
4. Cash Flow Position
5. Tax Rate

Investment decision: It is concerned with an investment of firms fund in different assets (Fixed assets and current assets). Investment decision can be longterm or short-term.
Short-term investment decisions: are concerned with the decisions about the levels of cash, inventories and debtors. 
Long Term or Capital Budgeting Decisions: Related to decisions taken to invest in the fixed assets. There are certain factors which affect capital budgeting decisions. (a) Cash flow positions (b) Return on investment (c) Investment criteria.