Which is a short-term financial decision?

A short-term financial decision typically involves managing current assets and current liabilities, focusing on a time horizon of one year or less. These decisions are crucial for maintaining a company's liquidity and operational efficiency. The correct answer, Working capital management, perfectly exemplifies a short-term financial decision.

Working capital management involves:

• Managing inventory levels to optimize sales and minimize holding costs.
• Controlling accounts receivable to ensure timely collection of payments.
• Optimizing accounts payable to manage cash outflows effectively.
• Ensuring sufficient cash on hand for daily operations.

In contrast, the other options represent long-term financial decisions:

• Capital budgeting deals with long-term investment decisions in fixed assets.
• Dividend policy concerns how a company distributes profits to shareholders over the long run.
• Mergers involve significant, long-term strategic restructuring of companies.

Effective working capital management ensures a business has enough cash to meet its short-term obligations and supports its ongoing operations.