Financial Decision Influences

The financial management function of a firm can be expressed in terms of the major decisions of a financial nature that must be made. While there are many such decisions, they are classified in this chapter into three main types that focus respectively on investment, financing and profit distribution activities. Because of the potentially special importance of short-term investment decisions in small enterprise, the investment decision discussion is separated into discussion of both short-term (working capital and liquidity) and long-term (capital or fixed asset) investment decisions. Guiding all decisions are the objectives that the decision maker seeks to achieve and, accordingly, a review of the financial objectives of small enterprise owners is included. In exploring these issues the traditional finance theory perspective is compared with expected variations that might occur in small enterprises. Without duplication of other chapters in this book, some aspects of dealing with practical contexts of these decisions are also included.