Read the following passage and answer the question.

RST Ltd. is registered with capital of ₹20 crore. The paid up capital is ₹12 crore. The company was facing shortage of funds so management decided to raise funds by issue of equity shares of ₹100 each. The issue was fully subscribed by public. After some time, it was realised that the funds raised were in excess of the actual requirement.  The company raised the funds for expanding the business of manufacturing steel.

The company raised the funds for expanding the business of manufacturing steel.

Which type of decision is highlighted in the above statement?

Capital budgeting decision

The correct answer is option 1- Capital budgeting decision.

The statement highlights that the company raised funds for expanding the business of manufacturing steel, which relates to a decision about investing in long-term assets or projects. This is a capital budgeting decision, as it involves determining the funds needed for a significant investment in business expansion. Capital budgeting decisions are made when a company plans for large, long-term expenditures, such as buying machinery, expanding facilities, or entering new markets.