Modern businesses operate under very complex and sophisticated business environments. Managing various and multi-faceted internal activities is only part of the modern management's responsibilities. Yet the firm's immediate external environment poses another set of challenging factors. The analysis of the environmental factors is critical for the long-term success of the business.
Under strategic planning, we critically examine the impact of the following factors to business:
- Impact of the competitors to the business.
- Bargaining power of the suppliers.
- Bargaining power of the customers.
- Effect of the Government policies.
- Economic, political, social and technological environments under which the business operates.
Financial management is designed to help maximise the value of a firm. Value is determined, in the long run, by results as revealed in financial statements. The focus is on how current decisions affect future financial statements. The finance functions or decisions include: Investment or long-term assets mix decisions; Financing or capital –mix decisions; Dividend or profit allocation decisions; Liquidity or short-term asset-mix decisions.
A business firm performs finance functions simultaneously and continuously in the normal course of the business. They do not necessarily occur in sequence and as such finance functions require skilful planning, control and execution of a business's activities.