Definition
Financial strategy ensures the firm’s capital structure, liquidity, risk management, and capital allocation support competitive strategy and shareholder value.

Introduction
Strategy dies if cash runs out. Finance translates plans into fundable roadmaps with disciplined hurdle rates and risk hedges.

Explanation

Capital structure: target leverage band (cost of capital vs. flexibility); fixed–floating mix; covenants.

Capital allocation: invest/divest using NPV/IRR with strategic options logic; portfolio rebalancing.

Liquidity & working capital: cash conversion cycle, supplier terms, inventory policy.

Risk: FX/commodity hedging, insurance, scenario stress tests.

Scorecards: ROIC>WACC, free cash flow, net leverage, dividend/buyback policy aligned to growth stage.

Key Takeaways

Fund strategy with flexible balance sheet; protect downside.

Tie exec comp to ROIC and FCF, not just revenue.

Treat capital allocation as a repeatable capability.

Real-World Case
American Express balances growth with stringent risk controls and capital buffers; allocates capital to high-ROIC customer segments and partnerships.
Reference: AmEx annual reports.