The priorities companies must weigh when making financial decisions are the same

Question

The priorities companies must weigh when making financial decisions are the same ones you weigh when managing your personal finances.

Review the section titled "The Role of Financial Management."

Then, give one example from your personal finances that demonstrates EITHER

balancing short term and long-term debt the tradeoff beween risk and return,

OR your spending's relationship to how flexible and resilient you can be.

What can we learn from your personal finance example about "big" business finance?

Explanation / Answer

Yes. Priorities companies must weigh when making the financial decisions are the same ones you weigh when managing your personal finances.

Example from my Personal Finances: I took a long term debt for the educational loan with the repayment period of 18 years. Reason why I took such decision was the amount can be paid as I progress in my career. Risk may be high for the long term debt as the ability to repay becomes difficult due to the increase in interest amount. At the same time, I took short term debt for the personal expenses by taking the personal loans. As the interet rate is high for the short term debts, I ensured that I will be able to repay back the interest and principal. So I determined the cash flow for my upcoming months to calculate the repayment tenure.

We can learn from the personal finance about how much amount can be taken as the debt and through which method. i.e., to whether take short term debt or long term debt. Ability to generate the excess cash flow to repay the debt amount.

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