FINANCIAL POLICY AND STRATEGIC MANAGEMENT

Strategic financial management is about creating profit for the business and ensuring an acceptable return on investment (ROI). Financial management is accomplished through business financial plans, setting up financial controls, and financial decision making. Strategic Financial Management is the combination of the corporate strategic plan that embraces the optimum investment and financing decisions required to attain the overall specified objectives. It is basically about the identification of the possible strategies capable of maximizing an organization's market value. The inter face of strategic management and financial policy will be clearly understood if we appreciate the fact that the starting point of an organization is money and the end point of that organization is also money again. Offer of the organization is only a vehicle that links up the starting point and the end point. No organization can run the existing business and promote a new expansion project without a suitable internally mobilized financial base or both internally and externally mobilized financial base. Following is a list of some standard questions, which are to be examined by the planners for drawing the policy framework.

Q1. From where do we propose to get additional funds to grow internally or externally or both? If the answer to the above question describes an internal dependence then comes the question

Q2. Will this affect the performance of the existing business?

If the answer to the question Q1.favours an external search then follows the question

Q3. How do we propose to mobilize that additional fund?

Q4. What policy of capital structure do we propose to follow? Minimum debt or highly leveraged structure?

Q.5. How much liquid cash or current assets do we propose to keep in hand?

Q.6. What will be effect of growth on cash flow?

Q.7. What accounting system and policy do we like to use and why?

Q8. What austerity measures are to be undertaken for generating more funds if needed?

Q9. What financial measures are to be taken into consideration for loss making units?

(Source: CA Final Study material on Strategic Financial management and google search materials)