Financial Planning and Management — Flashcards

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The three main financial decisions are: 1. **Investment Decision** – Choosing where to invest funds (in fixed or current assets). 2. **Financing Decision** – Deciding how to raise funds (through debt…

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Financial management refers to the process of planning, organizing, directing, and controlling the financial activities of a business. It involves: - Procuring funds in a cost-effective manner. - Usi…

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An investment decision involves selecting the best assets in which a company should invest its funds. It includes: - **Long-term investments** in fixed assets like machinery, land, and buildings (cal…

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A financing decision is about how a company raises funds for its operations and investments. It includes: - Choosing between debt (like loans, debentures) and equity (like shares). - Deciding the rig…

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The dividend decision involves determining how much of the company’s net profit should be: - **Distributed to shareholders** as dividends. - **Retained in the business** for future growth, expansion,…

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Profit maximization means aiming to earn the highest possible profit in the short term. While it is a common goal, it has limitations: - It ignores the **timing of returns** (a rupee today is better …

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Wealth maximization means increasing the market value of the company’s shares. It focuses on: - Earnings per share (EPS). - Time value of money. - Risk-return trade-off. Unlike profit maximization, …

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Financial planning is the process of estimating a company’s future financial needs and deciding how to meet them. It includes: - Estimating current financial condition. - Projecting future growth and…