ACCA Applied Knowledge · Business and Technology · The relationship between accounting and other business functions
A company's finance director is asked to advise on whether to raise a bank loan or issue new shares to fund an expansion. Which finance function activity is this?
Advising on a bank loan versus a share issue is financial management, because it concerns choosing sources of funds and the capital structure. Financial accounting prepares statutory statements and internal audit tests controls, so neither involves deciding how to fund an expansion.
- AFinancial management, covering sources of funds and capital structureCorrect
- BFinancial accounting, preparing statutory financial statements
- CInternal audit, testing the effectiveness of controls
Explanation
Choosing between debt and equity finance concerns raising funds and capital structure, which is financial management or treasury. Financial accounting produces external statements, and internal audit reviews controls, so neither covers funding decisions.
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