Investing and Financing Decisions
August 29, 2010
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Posted by admin
Every company requires real assets includes assets that are tangible and intangible, which the assets that are used to produce real goods and services. There are 2 (two) questions that must be answered by financial management that is related real assets investing. First is how much cash is required for the real assets investing. Second, the type of company’s investing assets.
This is the job for financial management, which is called investing decision. Investing decision is a decision to determine which types of real assets that should be taken over by a company. The success of financial management in taking investing decision is determined by the ability to choose the real assets that can bring high returns for the company.
After the financial management is able to select and determine the amount of cash that are needed for investing in real assets, then the next responsibility is to seek financial resources to finance this real assets investment or which is called financing decisions. Company’s financing policy requires the manager to identify the way to finance this new investment, which the alternative is to use retained earnings, allowance from debt instruments, and issuing new shares.
These two alternatives can be met by the company by issuing certificates (financial asset). Certificates that issued by a company are the claim on income that is produced from the real assets such as interest and dividends. These certificates are traded in financial market.
In financing decisions, financial management will put itself between companies that has real assets and financial market to raise funds in order to finance the real assets.
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Categories: Financial Information
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Tags: Financial Investment, Money Investment
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