Government action can significantly impact the financial decision-making process in the following five areas:

1. Credit Controls:
   Governments can impose credit restrictions through central banks, limiting the amount of credit available to businesses. This increases the cost of borrowing and makes financing options more challenging, which affects liquidity management and capital expenditure planning.
2. Taxation Policies:
   Changes in corporate tax rates, sales tax, withholding tax, and capital allowances can influence cash flow, profitability, and the overall cost of operations. Finance managers must account for these when making investment decisions or determining dividend policies.
3. Custom Duties and Trade Tariffs:
   Governments may introduce or adjust custom duties and tariffs on imports and exports. High tariffs can increase production costs if the company relies on imported raw materials, while export restrictions could limit market expansion opportunities.
4. Exchange Rate Controls:
   Governments can control exchange rates or impose restrictions on the use of foreign currencies. For multinational firms, this affects currency risk management, profit repatriation, and the cost of international transactions.
5. Price and Wage Controls:
   Government-imposed limits on prices or wages can affect a company’s profitability by restricting the ability to pass on cost increases to consumers or reduce costs through wage adjustments. This forces finance managers to find other ways to optimize costs and maintain financial stability.