Do financial management decisions influence firm value - Essay Example

Investment Decisions The BP is a well-established company that diversified into business such as chemicals, coal, gas, minerals and nutrition that would improve the effectiveness of the company. This diversification strategy led to problems in allocating investment resources between the different division’s projects of the large conglomerate. According to Dayananda (2002), the investment has led to losses that demonstrate that the company could not successfully compete in the fiercely competitive international oil business while also trying to compete in other business.

Owing to the volatile prices, BP shifted to the financial tool to help it to accomplish its strategies goals. According to Kent & Gerald (2011), the company began to concentrate primary on the investment business; problems of fitting corporate decisions into both the strategic and financial framework of the company are difficult to resolve. This led to a conclusion that the investment decisions were based upon dissimilar theories that sometimes contracted each other. BP investment growth focused on three areas of great interest; deep-water production, global gas including unconventional gas, and managing some of the major globe oilfields.

In each field, BP has made significant advances. Financial Decisions Eugene & Michael (2010) demonstrate that finding useful financial tools to make informed investment decisions has traditionally been the point of interest of corporate financial officers. The most widely accepted financial decision focus mainly on a narrow range of internal variables, quantitative information, shorter-term results, control processes, and techniques to determine specific risks of the BP. McDonald (2001) indicate that BP outlined financial decisions to further enhance efficiency and condense costs within the company with the main purpose of improving its annual underlying pre-tax profitability.

The company is expected to enhance capital efficiency and improve returns in the coming years. Finally, BP's financial management decisio