Financing Decision

Financing Decision

As a financial manager you have to plan for and mobilize the required funds from various sources when they are required and at an acceptable cost. This decision is called financing decision.
For this purpose, you have to keep liaison with the banks and financial institutions. You also deal with merchant banking agencies for procuring funds from the public thorough issue of shares, debentures and inviting public to subscribe to its fixed deposits. In deciding, how much to procure from various sources, you will weigh many considerations like cost of funds in the form of interest / dividend and cost of public issue in case of shares and debentures and the length of time for which funds will be available. Banks and other financial institutions, which give short-term and long-term loans generally, lay down their conditions. These conditions are aimed at ensuring the safety of the loans given by them and contain provisions restricting the freedom of the borrower to raise loans from other sources. Therefore, you as financial manager will try to balance the advantage of having funds available with the costs and loss of flexibility arising from the restrictive provisions of the loan contract.
Now, you will understand more about the financing decision in different steps. In the unit 5, you will know in detail about the short-term sources and its needed decision. In this unit, you will learn about the long-term sources and decision in respect of financial structure & the financial condition of the organization.
You will also know about the cost of capital & its implications and effects of investments. Further, as finance manager, you will also know how to keep the stakeholder of the organization in tact, by means satisfying their expectations.
In this lessons, you will understand about the financial structure, which lay emphasis on product market, labour market, Stakeholders like shareholders and bondholders,creditors, agencies involved during financial decision of any organization

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