A long term investment decision is called _____________.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Capital Budgeting
Option (1) Capital structure — Incorrect. Capital structure is the mix of owners’ funds and borrowed funds. It comes from the financing decision, not the investment decision.
Option (2) Financial Planning — Incorrect. Financial planning estimates how much money is needed and when. It is not an investment decision.
Option (3) Capital Budgeting — Correct. A long-term investment decision is also called a capital budgeting decision. Examples are buying a new machine, buying a new fixed asset or opening a new branch.
Option (4) Working Capital decision — Incorrect. Working capital decisions are short-term investment decisions, about current assets like stock and cash.
NCERT (2026-27 Edition): “Investment Decision … 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. For example, making investment in a new machine to replace an existing one or acquiring a new fixed asset or opening a new branch, etc. …” |