ACC501 Business Finance (GDB) No. 01 Due Date: November 23, 2015

Evaluation and planning. First and foremost, financial management involves evaluating the financial effectiveness of current operations and planning for the future. 

• Long-term investment decisions. Although these decisions are more important to senior management, managers at all levels must be concerned with the capital investment decision process. Such decisions focus on the acquisition of new facilities and equipment (fixed assets) and are the primary means by which businesses implement strategic plans; hence, they play a key role in a business’s financial future.
• Financing decisions. All organizations must raise funds to buy the assets necessary to support operations. Such decisions involve the choice between the use of internal versus external funds, the use of debt versus equity capital, and the use of long-term versus short-term debt. Although senior managers typically make financing decisions, these choices have ramifications for managers at all levels.
• Working capital management. An organization’s current, or shortterm, assets, such as cash, marketable securities, receivables, and inventories, must be properly managed to ensure operational effectiveness and reduce costs. Generally, managers at all levels are involved, to some extent, in short-term asset management, which is often called working capital management.
 • Contract management. Health services organizations must negotiate, sign, and monitor contracts with managed care organizations and thirdparty payers. The financial staff typically has primary responsibility for these tasks, but managers at all levels are involved in these activities and must be aware of their effect on operating decisions.
• Financial risk management. Many financial transactions that take place to support the operations of a business can increase a business’s risk. Thus, an important financial management activity is to control financial risk.