CS Executive · Corporate Accounting and Financial Management · Introduction to Financial Management
Which of the following is an example of a financing decision rather than an investment decision?
Deciding the debt and equity mix for funding a new plant is a financing decision because it concerns the sources of capital. Choosing machines, acquiring a business or setting inventory levels involve deploying funds in assets, which are investment decisions.
- ADeciding the proportion of debt and equity to raise funds for a new plantCorrect
- BChoosing between two machines for purchase
- CDeciding to acquire a competitor's business
- DSelecting the level of inventory to carry
Explanation
A financing decision concerns the sources and mix of funds, such as debt versus equity. Selecting a machine, acquiring a business and setting inventory levels all concern how funds are deployed in assets, so they are investment decisions (including working capital decisions).
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