Question

(Q.NO. 32 TO 34 OF 6 MARKS EACH)
32. 'Monisha Consumer Goods' is a leading consumer goods chain with a
network of 46 stores primarily across Mumbai, Delhi and Pune. It was
started by Monisha Gupta in 1987. It has a large market share in Mumbai.
Delhi and Pune, Looking for an opportunity to expand, it has decided to
open a new branch in Kerala. It has to decide on what new resources it
will invest in so that it is able to earn the highest possible return for its
investors. Once the company believes that it will be able to generate higher
revenue and profits, it also has to decide on how this project will get funded.
The finance manager Atul was told to have an optimal capital structure by
striking a balance between various sources of getting the project funded
so as to increases shareholders' wealth. Atul, after assessing the cash
flow position of the company, evaluated the cost of different sources of
finance and compared the risk associated with each source as well as the
cost of raising funds.
(a) State the two financial decisions discussed in the above situation.
(b) Explain any two financial decisions discussed in the above situation.​

Answer 1

Answer:financial decisions taken:

            1. what new resource to invest to earn high possible returns i.e. Profit

            2. How the project will be funded

Explanation:

            1.what to invest on?

when ever you decide to inves in any new venture or plan for growth, we must take into confederation all the recourses required i.e. Workforce required, capital required, machine required, knowledge required and how to utilise these resources in an effective manner.

          2.how will it be funded?

the answer to this question requires specialised knowledge. It is based on the decision taken about the source of attaining the required resources I.e. banks, financial institutions, raise share, debentures, loan from a friend, public deposit, foreign investment etc

Answer 2

Answer:a

i investment decision/capital budgeting decision / long term investment decision.

It involves deciding about how the funds are invested in different assets so that they are able to earn the highest possible return for the investors.

ii financing decision.

It refers to the decision about the quantum of finance to be raised from various long term sources of finance .

b) i Cash flows of the project.

ii the rate of return of the project

Explanation: