Question

When you look at the three types of financial management decision how do you think you will prioritize your spending? What comes first, second and third if you have limited financial resources? 

Answer 1

The three types of financial management decisions are capital budgeting, capital structure and working capital management. The priority of spending is focused first on capital budgeting and then comes capital structure and then comes the decision of working capital. The priority has to be given to capital budgeting because capital budgeting is the process which are used to determine whether a project should be undertaken or not, whether it is going to add value to the company or not. Capital structure is important to make sure that cost of overall capital remains minimum and working capital decision is important to make sure that the day to day business activities can be performed without any hinderance. If you have limited financial resources then capital budgeting comes first, then second comes the capital structure decision and third comes the working capital.