Financial Managerial Decisions

Question 1

What is the role of the financial manager?

Answer 1

It is to make decisions for the firm with regards to:

• investment
• financing
• dividend
• restructuring

Question 2

What is the investment decision about?

Answer 2

• “How are funds used?”
• Let’s say you have fixed amount of capital, how are you going to use it? Which projects to pursue?
• ‘Capital budgeting’ -> “Long-term investments”

Question 3

What is the financing decision about?

Answer 3

• How does a corporation finance its activities?
  -> Get money from debt? (Bank)
  -> Get money from equity? (Shareholders)
  => How much of each type of money should I be getting?
  -> That’s the ‘Capital Structure’

Question 4

What is the dividend decision about?

Answer 4

-“How much?” to share holders

= “When” to give to shareholders

Question 5

What is the restructuring decision about?

Answer 5

• actions that corporation can take to benefit the firm

- so changing ownership, legal stuff, etc.

Question 6

What is the goal of the financial manager?

Answer 6

• They have many goals, but they must all adhere to the PRIMARY GOAL
• the primary goal is to ‘maximise the current value of the firm for existing shareholders’