Read the Paragraph given below carefully and answer the following question.

Sunrises Ltd. dealing in readymade garments, is planning to expand its business operations in order to cater to international market. For this purpose the company needs additional ₹80,00,000 for replacing machines with modern machinery of higher production capacity. It involves committing the finance on a long term basis. These decisions are very crucial for any business since they affect its earning capacity in the long run. The company wishes to raise the required funds by issuing debentures. The debt can be issued at an estimated cost of 10%. The EBIT for the previous year of the company was ₹8,00,000 and total capital investment was ₹1,00,00,000. Instead of issuing 10% Debenture the Company can issue Equity Shares for raising the fund. The financial manager of the company would normally opt for a source which is the cheapest.

A decision for raising fund of ₹80,00,000 either from 10% Debenture or Equity Shares is a:

Financing decision

The correct answer is option 1-Financing decision.

The decision to raise funds of ₹80,00,000 either through 10% debentures or equity shares is a Financing decision.

Financing Decision: This involves determining the best way to raise the required capital for the company's operations or expansion. It includes deciding whether to use debt (like debentures) or equity (like issuing new shares).