Making an investment in long term asset is related to:

Capital budgeting decision

The correct answer is option 3- Capital budgeting decision.

Making an investment in long term asset is related to Capital budgeting decision.

Fixed capital refers to investment in long-term assets. Management of fixed capital involves the allocation of a firm’s capital to different projects or assets with long-term implications for the business. These decisions are called investment decisions or capital budgeting decisions and affect the growth, profitability, and risk of the business in the long run. These long-term assets last for more than one year. A number of projects are often available to a business to invest in. But each project has to be evaluated carefully and, depending upon the returns, a particular project is either selected or rejected. If there is only one project, its viability in terms of the rate of return, viz., investment and its comparability with the industry’s average is seen. There are certain factors which affect capital budgeting decisions.