CA Final · Advanced Financial Management · Financial Policy and Corporate Strategy
Which of the following best describes the role of financial strategy in relation to corporate strategy, as understood in strategic financial management?
Financial strategy aligns the raising, allocation and management of funds with the corporate strategy so that shareholder value is maximised. It covers investment, financing and dividend decisions in support of the firm's chosen direction, rather than being only a budget, only dividend policy, or a driver that overrides corporate strategy.
- AFinancial strategy is formulated first, and corporate strategy must then be fitted within the funds that finance decides to provide
- BFinancial strategy is the same as the annual budget prepared by the accounts department
- CFinancial strategy aligns the sourcing, allocation and management of funds with the corporate strategy to maximise shareholder valueCorrect
- DFinancial strategy deals only with dividend decisions and has no link to investment choices
Explanation
Financial strategy is a supporting strategy: it determines how funds are raised, deployed and returned so that the corporate strategy can be executed and value created. It is not a predecessor that dictates corporate direction, nor a mere budget, nor limited to dividends; it covers investment, financing and dividend decisions.
Did you get it right without looking?
One question tells you little. A timed set on Financial Policy and Corporate Strategy shows your real accuracy, how long you take and where you lose marks.
More Financial Policy and Corporate Strategy questions
- Surya Engineering Ltd has an EBIT of Rs 60 lakh and is all-equity financed with a cost of equity of 15%. It is evaluating a project with a p…
- Which statement best describes the Modigliani-Miller dividend irrelevance proposition in a perfect capital market?
- Rohini Textiles Ltd has an expected EBIT of ₹60 lakh, an effective tax rate of 25% and a capital structure with 12% debt of ₹200 lakh. Using…
- Meridian Steels Ltd (unlevered cost of equity 12%, tax rate 25%, no costs of distress) is all-equity financed with a value of Rs 300 crore. …
- Vihaan Ltd has a sustainable growth framework: net profit margin 8%, asset turnover 1.5 times, equity multiplier (total assets/equity) 2, an…
- Which of the following best describes the primary objective of financial policy within a firm's corporate strategy, as taught in the Advance…