This study examines the implications of the separation theorems in finance to shed light on how these theorems can be refined to accommodate real life financial applications and decision makings. We also generalize the financial theory of the firm by incorporating real options in the production function to accommodate the complexity of real world issues. This modified financial theory of the firm does not presume a perfect market but accommodates changes in the environment to set up investment and financial policies. It also integrates different business functions such as marketing and human resources management into the decision-making framework for the long-term growth and value maximization of the firm.