Read the following passage carefully and answer the questions given below.

'Laxmi Enterprise' is a textile manufacturing firm. It has been consistently earning good profits for many years. This year, too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in the future. Now they wished to diversify their business. The CEO of Laxmi Enterprise is considering two options, either to diversify into manufacturing cosmetics or switches. So they wanted to purchase land, to set up a manufacturing unit in the backward area of Assam, which would lead to the generation of employment opportunities in the area, but only after fulfilling all legal requirements and taking appropriate steps to ensure that the environment was not polluted. The finance manager of the company, Mr. Vikrant was asked by the management to prepare a report on the factors that should be considered while making their decisions.

Which of the following is not a factor affecting the important decision being discussed in the passage above?

Ways to improve the profitability of textile business

The correct answer is Option (4) → Ways to improve the profitability of textile business

The decision being discussed is related to diversification into a new business (cosmetics or switches) and setting up a new unit. Factors that affect this decision include:

• The amount of cash flows → Important, since investment requires heavy capital and future cash inflows must be considered.

• The rate of return of the project with risk factors → Important, as diversification brings uncertainty and risk.

• Details of the amount of investment, interest rate, cash flows and rate of return → Important for feasibility analysis.

However: Ways to improve the profitability of textile business → Not directly related, because the decision is about entering a new line of business, not about improving the existing textile unit.