MODEL ANSWER TO DISCUSS THE NATURE AND SCOPE OF STRATEGIC FINANCIAL MGMT?

    QUESTION DISCUSS THE NATURE AND SCOPE OF STRATEGIC FINANCIAL MGMT?

  STRATEGIC FINANCIAL MGMT CAN BE DEFINED AS THE SYSTEMATIC PROGRESSIVE APPROACH TO FIND,ANALYZE,SELECT AND IMPLEMENT THOSE FEASIBLE STRATEGIES THAT HELP IN OPTIMUM ALLOCATION OF FUNDS AND OTHER CAPITAL RESOURCES TO MAXIMIZE THE NET PRESENT VALUE OF THE FIRM AND TO ACHIEVE PREDETERMINED OBJECTIVES OF FIRM.

   NATURE AND SCOPE OF STRATEGIC FINANCIAL MGMT

1. DECISIONS REGARDING INVESTMENT POLICY FOR THE COMPANY:-
2. IN WHICH PROJECTS/ASSETS THE COMPANY SHOULD INVEST TO MAXIMIZE THE WEALTH OF SHAREHOLDERS
3. TO TAKE THE DECISION REGARDING OF GIVING DECISIONS OF PAYING DIVIDEND/REINVESTING
4. WHETHER SET UP NEW /OR ACQUIRE EXISTING COMPANY
5. NATURE AND SCOPE OF STRATEGIC FINANCIAL MGMT
6. DECISIONS REGARDING FINANCING POLICY OF THE COMPANY:-
7. CAPITAL STRUCTURE DECISIONS
8. HOW MUCH FROM LONG SOURCES AND HOW MUCH FROM SHORT TERM SOURCES
9. AVAILABILITY OF FUNDS AT THE RIGHT COST AND RIGHT TIME TO INCREASE THE RETURN FOR THE SHAREHOLDERS.

   STEPS IN STRATEGIC DECISION MAKING

1. DETERMINE THE MISSION AND VISION OF THE COMPANY
2. SWOT ANALYSIS
3. IDENTIFY AVAILABLE ALTERNATIVES AND COLLECT THE INFORMATION
4. ANALYZE
5. IMPLEMENT
6. TAKE NECESSARY STEPS

  FINANCIAL POLICY CAN BE DEFINED AS THE DRAFT OF RULES AND REGULATIONS THAT DESCRIBES THE FIRM’S PREFERENCES TOWARDS CAPITAL STRUCTURE,INVESTMENT STRATEGIES FOR INVESTING IN FUTURE PROJECTS AND BUSINESS MODEL STRUCTURE WITH A GOAL OF OF MAXIMIZING SHAREHOLDER’S WEALTH.

   NEED OF FINANCIAL POLICY

a.       ADEQUATE AND POSITIVE RETURN

b.       INVESTMENT IN THE RIGHT SECTOR

c.        TRIES TO MINIMIZE THE RISK

d.       TRY TO STOP THOSE PRACTICES WHICH HAS NEGATIVE IMPACT ON THE IMAGE OF THE COMPANY,LIFE CYCLE OF THE FIRM

   FACTORS

1. INDUSTRY TO WHICH IT BELONGS
2. MARKET SHARE OF THE FIRM
3. RISK ASSOCIATED
4. NET CASH FLOW
5. FINANCIAL POLICY OF THE COMPETITORS

FEATURES OF FINANCIAL POLICY

1. EASY TO UNDERSTAND
2. FULL FILL SHORT TERMS ND LONG TERM GOALS
3. SHOULD BE FEASIBLE
4. OPTIMUM UTILIZATION OF AVAILABLE RESOURCES
5. ABLE TO HANDLE FUTURE CHALLENGES AND UNCERTAINTIES

   COMPONENTS OF FINANCIAL POLICY

a.       DIVIDEND POLICY : RETENTION AND HOW MUCH TO PAY IN THE FORM OF DIVIDEND

b.       WORKING CAPITAL POLICY:AGGRESSIVE WORKING CAPITAL/CONSERVATIVE WORKING POLICY

c.        INVESTMENT POLICY

d.       CORPORATE RESTRUCTURING POLICY

e.       CASH PLANNING AND BUDGETING POLICY

f.        CAPITAL STRUCTURE POLICY

g.       CREDIT POLICY

h.       RISK MGMT POLICY