![]() In addition, returns on such investments are very late and can take long periods of time, over a year, before such an investment yields positive returns. Any commitment to such assets is irreversible and leads to the blockage of a significant amount of capital. Therefore Capex decisions need to be made very wisely. They often require heavy capital expenditure and are always for a longer term. Long-Term Investment DecisionsĬapital budgeting decisions are decisions to invest in long-term assets to improve the overall production/servicing capacity of the organization. ![]() Managers must make the tough call of postponing investing in some assets that are not strictly necessary at present, or that may not give the desired return. ![]() As each company has scarce financial resources, it is crucial to decide which asset to invest in first. Assets can be both short-term and long-term. Managers decide how to invest the company’s funds in different asset classes, depending on the needs of the organization. Investment decisions are decisions that relate to the investment in different types of assets, instruments, securities, etc. We will discuss below the most important financial decisions that these professional managers usually make: These managers are professionals and specialize in making and executing financial plans and decisions for the company. They ensure that the liquidity position of the company is satisfactory and that the company remains in a sound financial position. Professional managers plan and set goals, organize and manage financial activities to achieve these goals, and eventually perform the control function to review and, if necessary, correct these plans. Financial Managementįinancial management is the stream of management that is associated with financial decisions. These decisions pertain to working capital management, arranging short-term funds and credits, the provision of dividends, etc. Short-term financial decisions are decisions that are taken for a short period of time, usually less than a year.
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