Question

Samta Ltd. is in need of finance to expand the business. The finance manager, Sumit, is looking into different sources of funds available. After doing the cost and risk analysis, he found debt as the best option but as the company has no pay huge insurance premium for the plant and machinery and Identify the factor which affected this decision. (a) Risk consideration (b) Cost of fund (c) Fixed operating cost (d) All of these

Answer 1

The correct answer to this question is option (d) All of these.

Explanation:

• Risk consideration is a significant part of business, it involves evaluating each move that the organization makes to ensure the result is the best it can be.  

• The cost of funds is a suggestion to the interest rate paid by financial organizations for the funds that they use in their business. A lower-cost will end up creating better returns when the funds are used for short and long-term loans to borrowers.

• Fixed operational costs are those expenditures that don’t change irrespective of the business income. Usually found in operating overheads such as Administrative and Sales General.  

• Sumit considered all three factors while making the decision of choosing debt as the source of fund.

Answer 2

Explanation:

cost involved

risk

control consideration