Businesses rely heavily on careful financial management for survival and growth. This involves the optimal procurement and usage of funds, identifying different sources, and comparing their costs and associated risks. At its core, financial management involves three crucial financial decisions: investment, financing, and dividend decisions. Investment decisions, often termed capital budgeting decisions, determine how a firm's scarce resources are allocated to different assets. Long-term investment decisions involve committing funds for extended periods, for example, acquiring fixed assets like new machinery or buildings. These decisions are vital as they significantly impact a business's earning capacity, size, profitability, and competitiveness over time, often involving large sums that are difficult to reverse without substantial cost. Financing decisions focus on determining the quantum and proportion of funds to be raised from various long-term sources. The main categories of funds are shareholders' funds (such as equity and retained earnings) and borrowed funds (like debentures and loans). The chosen mix of debt and equity constitutes the company's capital structure. While debt may be cheaper due to tax deductibility, it increases financial risk because interest and principal payments are obligatory. Equity, though costlier, does not impose fixed payment obligations. The financing decision significantly influences the overall cost of capital and the financial risk of the enterprise.