23.3. Functions of Financial Management

Try these first

1. 1.

   What is the main purpose of financial planning?

   Hint

   Think about what businesses need to operate effectively.

2. 2.

   What does managing working capital involve?

   Hint

   Look at everyday bills and inventory.

3. 3.

   What is the primary goal of financial planning?

   • Maximizing profits
   • Ensuring liquidity
   • Estimating capital requirements

   Hint

   Think about the foundation of how businesses operate.

4. 4.

   True or False: The financing decision refers to how much profit to reinvest in the company.

   • True
   • False

   Hint

   Revisit definitions of financing versus profit retention.

5. 5.

   A company is deciding whether to invest in new software development or upgrading existing systems. Apply the capital budgeting techniques of NPV and IRR to determine which project they should fund.

   Hint

   Remember the formulas for NPV and IRR.

6. 6.

   A business has received offers for both debt financing and equity financing. Create a comparative analysis regarding the costs, benefits, and potential risks associated with each option.

   Hint

   Think about which option aligns with the company's growth strategy.