Question

What are some of the most important financial management decisions? Provide some real-life examples based on your research.

Answer 1

Some of the most important financial management decisions include capital budgeting, capital structure, and working capital management. According to the text, capital budgeting is the process of planning and managing the long-term investments of a firm to make sure that the firm benefits from them rather than losing money. The capital structure of a firm is about how much and from where a firm should borrow; the key is to borrow in the least expensive way. A firm's working capital management is about the firm's short-term assets and liabilities and whether the firm can afford to keep up the day-to-day activities without any major issues that could be costly.

A real life example could be an airline acquiring and using a larger aircraft than needed for a route that is not very popular.