How government policy decision influenced Financial Management - Essay Example

Policy Decisions and Influence on Financial Management There are many policy decisions factors that influence financial management. These include taxes, wars and financial influences, political changes and the stock markets, investments and accumulation goals. Taxes Taxes are the most popular and strongest influence given that it deals with use of money. Taxes are a way of generating revenue for the government (Hu, Li, Liu, Baolei, & Gaoling, 2012). Where the government or an organization overtaxes it’s people then enough money is available but citizens living below the poverty line in such a country may be highly impoverished due to heavy taxation .

So for a government to manage its finance properly, then it must follow the laid down rules and regulations so that there can be a balanced change in the budget when taxes are increased (Choi, Kim, Sami, & McKenzie, 2012). Wars Political changes in a government structure may trigger wars such as post-election violence as witnessed in some countries. This will definitely affect the stock market of such a country and the spending behavior of its citizens and this affects businesses some of which come to stand still.

This wave of political change affects financial management .If a country, company or an organization is involved in a trade with another such wars may affect financial management (Sara, 2011). Political Changes and the Stock Market Political parties in a country contribute immensely towards the economy of a country based on different concepts and perceptions of each .Some political parties can improve stock markets while they are in power while some may create a collapse to the economy. This affects businesses and financial management because shares are sold on the stock market and organizations and businesses use this money to improve their business.

When there is less money there is less improvement and financial deficit is likely to be experienced. Concerning stock market, if a country is in recession purchase of goods and services becomes less. Where less goods and services are purchased, then there will be less money in the business. With less money the financial manager will have to device new ways to produce their own goods, process them and market their own goods and services to generate income. Imposition of Bans At times a government may place bans on sales of goods which promote the economy of a country .

Placement of such bans may result to decreased income which may cause instability in economy and consequently affect financial management. Positive Effect of the Policy The intended or positive effects of a government policy vary widely based on the type of an organization or company and the context in which they are made up. Due to this, policies should be carefully enacted to ensure their effectiveness. One of the positive benefits of these policies on government financial management include corporate purchasing policies which projects that all purchases above a certain value should be standardized by way of purchasing process (Brigham & Houston, 2011).

This way, a country’s government can employ a standard purchasing through policy which enables a government or an organization to limit wastage and normalize purchasing. Other positive benefits include