Match the LIST-I with LIST-IILIST-ILIST-II(Type of Decision or Requir…

The correct answer is Option (4) → A-IV, B-I, C-II, D-III

(A) Dividend Decision — this matches (IV) Shareholder’s preference. The dividend decision settles how much profit is paid out and how much is retained, and that choice falls directly on the owners. Shareholders who need a regular income from their shares want a larger dividend. Those who want the value of their shares to grow are better served if the money stays in the business. So it is the owners’ wishes, not any cost or market condition, that pull this decision one way or the other.

(B) Financing Decision — this matches (I) Fixed operating costs. The financing decision fixes the proportion of debt to equity, and debt brings a fixed interest burden. Heavy fixed operating costs already make earnings rise and fall sharply with every change in sales. A firm in that position cannot safely add a fixed interest burden as well, so it prefers equity. The link between the two runs through risk.

(C) Capital Budgeting Decision — this matches (II) The investment criteria involved. A long-term proposal is accepted or rejected by the tests applied to it, such as payback period, rate of return and net present value. The decision is simply whether the project passes those tests, so the criteria are what govern it.

(D) Working Capital requirement — this matches (III) Business Cycle. Working capital rises and falls with the level of activity. In a boom, sales and production rise, and more money is locked up in stock and in debtors. In a downturn, sales fall and the requirement falls with them.