XY Ltd. wanted to launch a new product line. For this, they invested huge amounts of money on research and development programme. Identify type of financial decision highlighted above.

Capital budgeting decision

The correct answer is option (3) : Capital budgeting decision

The type of financial decision highlighted in the scenario where XY Ltd. invested a significant amount of money in research and development for a new product line is:

(3) Capital budgeting decision.

Capital budgeting involves making strategic investment decisions regarding long-term projects or initiatives that are expected to generate returns over an extended period. This decision-making process includes evaluating various investment opportunities and selecting the most profitable projects that align with the company's long-term goals and objectives. In this case, the decision to invest in research and development for a new product line falls under the domain of capital budgeting.

(1) Financing decision: The financing decision refers to the choice of the appropriate sources of funds for the company's operations and investments. It involves determining the optimal capital structure and deciding how to raise funds, whether through equity, debt, or other financial instruments.

(2) Working capital decision: Working capital decisions pertain to the management of the company's short-term assets and liabilities. It involves managing the day-to-day operational requirements of the business, including cash management, inventory management, and accounts receivable and payable.

(4) Dividend decision: The dividend decision involves determining the portion of profits that should be distributed to shareholders as dividends and the portion that should be retained within the company for future growth and investment. It entails striking a balance between rewarding shareholders and retaining earnings for reinvestment in the company's operational and projects.