Decisions related to investment:

Business requires capital investment in various assets that too for a long and fixed term. This includes investment in machinery, land, etc. It is always a risky and tricky task for the financial manager to identify the best asset in which investment should be made. Hence it is very crucial that decision of investment is evaluated in terms of expected return and risk.

Investment decision is called capital budgeting. There are several methods of capital budgeting brought in use by the finance manager for deciding the investment decision to be taken for the company. Few of these methods are pay-back method, rate of return method, discounted cash flow method, etc.

Decisions related to dividend: Dividend is a part of profit of a company which is distributed among its shareholders. Dividend is a return to shareholders on their investment. The financial manager has to tactfully decide what part of profit should be distributed as dividend and what part of profit should be retained in business.