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CA Intermediate · Financial Management and Strategic Management · Scope and Objectives of Financial Management

Which of the following is a decision that falls under the finance function of 'financing decision' rather than 'investment decision' or 'dividend decision'?

Deciding the proportion of debt and equity to raise funds is a financing decision, as it concerns the capital structure and sources of finance. Choosing machines or acquiring a unit is an investment decision, and deciding retention is a dividend decision.

  1. ADeciding the proportion of debt and equity to raise funds for a new plantCorrect
  2. BChoosing between two machines of different capacity for purchase
  3. CDeciding the percentage of profit to be retained in the business
  4. DDeciding whether to acquire a competitor's business unit

Explanation

Financing decision concerns the sources of funds and the capital structure mix of debt and equity. Choosing machines and acquiring a business are investment decisions, while deciding the retained profit proportion is a dividend decision.

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