Practicing Success
Practicing Success
CUET Preparation Today
| A company has to finance its budgeting decision. The available sources are- (i) Issue of shares, (ii) Issue of debentures, (iii) Trade credit, (iv) Taking short-term loans, (v) Taking long-term loans. Which sources company may prefer from above the available sources? |
(i), (ii), (iii) (ii), (iii), (iv) (i), (iv), (v) (i), (ii), (v) |
| (i), (ii), (v) |
| Capital budgeting decision relates to investment in fixed assets. Fixed capital refers to investment in long-term assets. Management of fixed capital involves allocation of firm’s capital to different projects or assets with long-term implications for the business. These decisions are called investment decisions or capital budgeting decisions and affect the growth, profitability and risk of the business in the long run. These long term assets last for more than one year. It must be financed through long-term sources of capital such as equity or preference shares, debentures, long-term loans and retained earnings of the business. Fixed Assets should never be financed through short-term sources. |
