Investment,financing and dividend decision are all. inter-related.

comment Financial decisions refer to decisions concerning financial matters of a busines s firm.There is many kinds of financial management decisions that the firm makes in pursuit of maximising shareholder s wealth,kind of assets to be acquired,pattern of capitalisation,distribution of firm income etc.we can classify these decisio ns into three groups: Investment-decisions:Investment decision relates to the deter mination of total amount of assets to be held in the firm,the composition of the se assets and the business risk complexions of the firm as perceived by its inve stors.The investment decision can be classified into two broad groups:-(1) long term investment decision and (2)short term investment decision.The long term inv estment decision is referred to as the capital budgeting and the short term inve stment decision as working capital management. Financial decisions:The financing decision is not only concerned with how best to finance new assets.but also concerned with the best overall mi x of financing for the firm.A finance manager has to select such source of fund s which will make optimum structure.The important thing to be decided here is th e proportion of various source in the overall capital mix of the firm.the debt equi ty ratio should be fixed in such a way that it it helps in maximising the profit ability of the concern.The financial manager has to strike a balance between var ious source so that the overall profitability of the concern improves.If the cap ital structure is able to minimise the risk and raise the profitability then the market prices od the shares will go up the wealth of shareholders. Dividend decisions:The third major financial decision relates to the disburse ment of profit back to the investors who supplied capital to the firm. The term dividend refers to that part of a company which is distributed by it among share holders. The dividend decision is concerned with the quantam of profit to be dis tributed among shareholders. A decision has to be taken whether all the profits are to be distributed ,to retain all the profits in buisness or to keep a part o f profit in the business and distribute other among shareholder.the higher rate of dividend may raise the market price of shares and thus the wealth of shareho lders. Inter-relation of financial decisions:These decision are inter-related because the underlying objective of all these decision is the same,i.e.maximisation of shareholders wea lth.all thes edecision influence one another and are inter-dependent.for example -the decision to invest in some proposal cannot be taken in isolatio without hav ing finance available for the same the financing decision in turn is influenced by and also influences the dividend decision.in case the profit are retained for financing of the investment,the profit available for distributed to the shareho lders as dividend are reduced an efficient financing management thus, has to tak e the optimal joint decision by evaluating each of the decision involved in rela tion its effect on shareholders s wealth and by considering the joint impact of thes e decisions on the market value of the company s shares.