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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Advanced Financial Management

Case: Meghna Pharma Ltd is deciding the strategic financial decisions it must make. Its management lists: (a) choosing a new plant, (b) deciding how much to raise as debt versus equity, (c) deciding how much profit to pay as dividend. These three correspond respectively to which financial decisions?

Choosing a new plant is the investment decision, deciding the debt-equity mix is the financing decision, and deciding how much profit to distribute is the dividend decision. These are the three core decisions of financial management, in that order.

  1. AFinancing, investment, dividend
  2. BDividend, financing, investment
  3. CInvestment, dividend, financing
  4. DInvestment, financing, dividendCorrect

Explanation

Selecting assets such as a plant is the investment decision; the debt-equity mix is the financing decision; the payout of profits is the dividend decision. Other options misorder these.

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