Question

What is financing
Decision​

Answer 1

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.

Answer 2

Definition:

The Financing Decision is yet another crucial decision made by the financial manager relating to the financing-mix of an organization. It is concerned with the borrowing and allocation of funds required for the investment decisions.

For example

1. interest on borrowed funds have to be paid whether or not a firm has made a profit.
2. Likewise, borrowed funds have to be repaid at a fixed time.
3. Shareholders funds involve no commitment regarding payment of returns.
4. A firm should thus have a mix of debt and equity.