What is the other name of long-term investment decisions?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Capital Budgeting Decision
Option (1) Working Capital Decision — Incorrect. Working capital decisions are the short-term investment decisions: how much cash, stock and debtors to keep.
Option (2) Dividend Decision — Incorrect. This decides how much of the profit is paid to shareholders and how much is kept in the business.
Option (3) Financing Decision — Incorrect. This decides where the money comes from, that is, the mix of debt and equity. It is about raising funds, not using them.
Option (4) Capital Budgeting Decision — Correct. A long-term investment decision commits funds to fixed assets for many years, such as a new machine, a new plant or a new branch. It is also called a capital budgeting decision. Such decisions involve large amounts and cannot be reversed without heavy loss.
NCERT (2026-27 Edition): “Investment Decision A firm’s resources are scarce in comparison to the uses to which they can be put. A firm, therefore, has to choose where to invest these resources, so that they are able to earn the highest possible return for their investors. The investment decision, therefore, relates to how the firm’s funds are invested in different assets.” “Investment decision can be long-term or short-term. A long-term investment decision is also called a Capital Budgeting decision. It involves committing the finance on a long-term basis. …” |