(Answer) Describe Three Managerial Finance Functions Key Decisions with one Example of Each
Managerial finance functions involve making finDescribeancial decisions that help an organization achieve its goals and maximize value for its shareholders.
1. Investment Decisions
This involves deciding where to invest the company's capital to generate the highest possible return.
An example of this could be a company evaluating different potential projects and deciding which one to invest in based on the expected rate of return. For instance, a manufacturing company might evaluate different production line investments to determine which one will provide the highest return on investment (ROI).
2. Financing Decisions
This involves determining how to raise the necessary capital to finance the company's investment decisions.
An example of this could be a company deciding whether to issue equity or debt to finance a new project. For instance, a startup company might choose to raise funds through venture capital funding or an initial public offering (IPO) to finance its growth plans.
3. Dividend Decisions
This involves deciding how much of the company's profits to distribute as dividends to shareholders and how much to retain for reinvestment in the company.
An example of this could be a company evaluating whether to increase its dividend payout ratio or retain more earnings to fund future projects. For instance, a mature company might decide to increase its dividend payout ratio to attract more investors and improve shareholder value.
Overall, the key decisions involved in managerial finance functions are aimed at optimizing the company's financial performance, managing financial risks, and ensuring the long-term financial sustainability of the company.