Read the following passage carefully and answer the given questions.

Arun wants to open a retail mart. He is thinking over the selection of the best financing alternative. He made an estimation that ₹40 lakhs, is an adequate amount of money to start the venture. He is planning to finance the business by investing ₹25 lakhs of his own money and the rest would be financed by debts. He is very careful about the future cash-flow in the business because the cost of raising funds from external sources is significant. He is working out to ensure that enough funds are available at the right time. If adequate funds are not available, the firm will not be able to honour its commitments and carry out its plans. On the other hand, if excess funds are available, it will unnecessarily add to the cost and may encourage wasteful expenditure. Since it will be a trading business, it needs lower investment in fixed assets. Since Arun is planning to initiate the business from a small level, the quantum of inventory and debtors required is generally low.

What is the major issue in the case?

Business Finance

The correct answer is option 1- Business Finance.

The passage focuses on Arun's considerations regarding:

• The amount of money needed to start the business (Rs. 40 lakhs),

• Sources of finance (own capital vs. debt),

• Cash flow management, and

• Availability of funds at the right time to avoid under- or over-capitalization.

These concerns clearly relate to Business Finance, which deals with planning, acquiring, managing, and utilizing funds effectively. Hence, Business Finance is the major issue in the case.