Skip to content

CA Final · Advanced Financial Management · Financial Policy and Corporate Strategy

Which of the following statements best describes the role of financial policy within the strategic decision making framework of a firm, as taught in Advanced Financial Management?

Financial policy provides the framework for investment, financing and dividend decisions so that they are aligned with corporate strategy and the objective of wealth maximisation. It is not limited to accounting or cash handling, and it must be reviewed when strategy changes.

  1. AIt sets out the framework for investment, financing and dividend decisions so that they support the corporate strategy and the goal of wealth maximisationCorrect
  2. BIt is concerned only with preparing statutory financial statements at year end
  3. CIt deals only with day-to-day cash handling and has no link with corporate strategy
  4. DIt is fixed once at incorporation and is not revisited when strategy changes

Explanation

Financial policy translates corporate strategy into guidelines for investment, financing and dividend decisions aimed at maximising shareholder wealth. The other options wrongly confine it to reporting, routine cash handling or a one-time decision, and ignore its link with strategy.

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.

Practise Financial Policy and Corporate StrategyFree diagnostic mock

More Financial Policy and Corporate Strategy questions