Evaluate the distribution of finance in support of organizational activities

The distribution of finance or allocation of resources is a policy decision that covers operational (short term) and investing and financing (long term) needs of the business organization. The objective of both short term and long term financing is to ensure solvency of the company and meeting of long term objectives and also fulfillment of short term operational needs which are in line with the long term objectives and overall business vision of the organization. Both short term and long term perspectives are evaluated below:

  1. Operational priorities: As the name signifies, these are day to day requirements of the business to keep the operations running. The idea is optimum fund utilization for smooth operations. Credit terms, choice of short term investments, inventory levels etc. are all working capital decisions that must be considered to allocate resources to operations.

Budget as a resource allocation tool:

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