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. Was this answer helpful?

Detailed explanation-2: -(ii) Financing decision It deals with quantum of finance to be raised from long-term sources, viz debt equity. In other words, it refers to the determination as how the total funds required by the business will be obtained from various long-term sources.

Detailed explanation-3: -Long-term financing involves the choice between debt (bonds) and equity (stocks). Each firm chooses its own capital structure, seeking the combination of debt and equity that will minimize the costs of raising capital.

Detailed explanation-4: -Financing Decision: A financial decision which is concerned with the amount of finance to be raised from various long term sources of funds like, equity shares, preference shares, debentures, bank loans etc. Is called financing decision. In other words, it is a decision on the ‘capital structure’ of the company.

Detailed explanation-5: -Capital Budgeting. Long term investment decision involves committing the finance on a long term basis. It is also known as capital budgeting decision.