Question

These decisions affect the liquidity as well as profitability of a business.

(a) Capital budgeting decision (b) Financing decision

(c) Working capital decision (d) Dividend decision​

Answer 1

Answer:

a.The capital budgeting process is a measurable way for businesses to determine the long-term economic and financial profitability of any investment project. A capital budgeting decision is both a financial commitment and an investment.

b. Financing decisions are the financial decisions related to raising of finance. It involves identification of various sources of finance and the quantum of finance to be raised from long-term and short-term sources. A firm can raise long term finance either through shareholders' funds or borrowed capital

c. As mentioned, working capital decisions are made with the short-term in mind. Thus, working capital policies aim at managing the current assets (generally cash and cash equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are acceptable.

d.The Dividend Decision is one of the crucial decisions made by the finance manager relating to the payouts to the shareholders. The payout is the proportion of Earning Per Share given to the shareholders in the form of dividends

Explanation:

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