MANAGEMENT

Detailed explanation-1: -This decision is about the quantum of finance to be raised from various long-term sources. This decision determines the overall cost of capital and the financial risk of the enterprise. The overall financial risk depends upon the proportion of debt in the total capital.

Detailed explanation-2: -Ans. Financing decision determines the overall cost of capital and the financial risk of the enterprise.

Detailed explanation-3: -Proportion of debt in the total capital determines the overall financial risk.

Detailed explanation-4: -What are Financing Decisions? Financing decisions refer to the decisions that companies need to take regarding what proportion of equity and debt capital to have in their capital structure. This plays a very important role vis-a-vis financing its assets, investment-related decisions, and shareholder value creation.

Detailed explanation-5: -Cost of capital is the minimum rate of return or profit a company must earn before generating value. It’s calculated by a business’s accounting department to determine financial risk and whether an investment is justified.