Final answer:
To manipulate short-run financial performance, a manager could lower expenses. Choices in financing, like obtaining funds from early-stage investors or loans, affect a firm's financial outcomes. Thus, managing costs is a direct way to improve profitability in the short term.
Step-by-step explanation:
To manipulate short-run financial performance, such as Return on Investment (ROI), a manager could lower expenses. By reducing costs, a firm can improve its profitability, at least in the short term, because profits are calculated as revenues minus expenses. Therefore, by managing and possibly minimizing outflows, management can present better financial results for the period in question. Conversely, increasing investment or revenues generally requires more time to reflect on financial performance, while delaying projects may not impact immediate financial indicators like ROI.
Firms often engage in activities that require spending capital initially with the expectation of future profits. To finance these activities, firms can utilize different sources of capital such as early-stage investors, reinvestment of profits, loans through banks or bonds, or through the issuance of stock. The decision on which source of capital to use also influences how the investment will be paid back. Choices in financing have a significant impact on the firm's financial performance in both the short and long term.