☰
✕

Financial Management
Question
Wired Faculty App

Financial decision is concerned with selection of fixed assets in which funds will be invested by the business? Identify the decision and explain any three factors affecting the decision.

Answer

Long-term Investment decision/ Capital Budgeting Decision: It is concerned with investment of firm’s fund in different fixed assets like buying of machinery.

Factors Affecting:

  1. Cash flow positions of the company: Before considering an investment option, business must carefully analyse the net cash flow expected from the investment during the life of the investment. Investment should be made if net cash flow is more.
  2. Return on investment: Investment should be done in the projects which earn the higher rate of return. It should be calculated on the basis of the expected return of the projects.
  3. Investment criteria: Before taking decision, each investment opportunity must be compared by using the various capital budgeting techniques. These techniques involve calculation of rate of return, cash flow during the life of investment, cost of capital etc.

Sponsor Area

Some More Questions From Financial Management Chapter

What is meant by Dividend decision? State any four factors affecting the Dividend decision.

What is meant by Financing decision? State any four factors affecting the financing decision.

 

Explain briefly the factors affecting the investment decision.

Explain, in brief, any five factors that should be taken into consideration while determining the long-term dividend policy.

Or

Explain factors affecting the dividend policy of a company.

“Determining the relative proportion of various types of funds depends upon various factors”. Explain any five such factors.

Or

“Determining the overall cost of capital and the financial risk of the enterprise depends upon various factors”. Explain any five such factors.

Investment decision can be long-term or short-term. Explain long-term investment decision and state any two factors affecting this decision.

Identify the financial decision which determines the amount of profit earned to be distributed and to be retained in the business. Explain any four factors affecting this decision.

Explain, in brief, any three decisions involved in financial management.

What is meant by investment decision?

From the point of view of ‘Floatation costs’ which source of finance is most appropriate?