1.2 FACTORS INFLUENCING FINANCIAL DECISIONS

The nature of financial decisions varies from one firm to the other. It may also be different for the same firm over a period of time. The reason is that the nature of financial decisions is influenced by the prevailing microeconomic and macroeconomic conditions. These factors need some explanation here.

1.2.1 Microeconomic Factors

Microeconomic factors are related to the internal conditions of the firm. Important among these conditions are:

  1. Nature and size of the enterprise;
  2. Level of risk and stability in earnings;
  3. Liquidity position;
  4. Asset structure and pattern of ownership;
  5. Attitude of the management.

If a firm is engaged in manufacturing operations or in the provision of public utility services, ...

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