Financial Decision Making
Companies financial decisions always involve : Strategic Planning and
Macroeconomics.
1. Strategic Planning: Corporate finance decisions are closely linked to a
company's long-term goals and strategic direction. Ex: investments, financing,
and dividend policies.
2. Macroeconomics: The broader economic environment, including factors like
GDP growth, inflation, and government policies, significantly influences
corporate finance decisions.
Financial Decision Making 1
, 💡 Remember → [ NPV= PV(inflow) - PV(outflow) ]
NPV>0 ————> IRR>COC
i.e. Internal Rate of Return is greater than Cost of capital/hurdle rate.
Companies want to make investors happy by giving them money.
They're not mainly focused on satisfying the board, employees, or big
organizations. If the company does well and earns more money than
expected, the market will notice, and the company's stock will go up.
Real Assets = Capital/ Cashflow
Financial Assets = Selling claims / proof papers
Capital = Long Term Money.
There are 2 ways to make investor happy :—
Managerial call: how much to give from that extra returns % and how to
give either as dividend or Buyback.
1. Dividend is the Real money which investors get (Extra money other than
their ROR)
Financial Decision Making 2
Companies financial decisions always involve : Strategic Planning and
Macroeconomics.
1. Strategic Planning: Corporate finance decisions are closely linked to a
company's long-term goals and strategic direction. Ex: investments, financing,
and dividend policies.
2. Macroeconomics: The broader economic environment, including factors like
GDP growth, inflation, and government policies, significantly influences
corporate finance decisions.
Financial Decision Making 1
, 💡 Remember → [ NPV= PV(inflow) - PV(outflow) ]
NPV>0 ————> IRR>COC
i.e. Internal Rate of Return is greater than Cost of capital/hurdle rate.
Companies want to make investors happy by giving them money.
They're not mainly focused on satisfying the board, employees, or big
organizations. If the company does well and earns more money than
expected, the market will notice, and the company's stock will go up.
Real Assets = Capital/ Cashflow
Financial Assets = Selling claims / proof papers
Capital = Long Term Money.
There are 2 ways to make investor happy :—
Managerial call: how much to give from that extra returns % and how to
give either as dividend or Buyback.
1. Dividend is the Real money which investors get (Extra money other than
their ROR)
Financial Decision Making 2
