Match List-I with List-II
|
List-I Decision |
List-II Activity |
|
(A) Long-term Investment Decision |
(I) Choice of Technique |
|
(B) Working Capital Decision |
(II) Cash Management |
|
(C) Fixed Capital Decision |
(III) Raising capital by issuing shares/debentures |
|
(D) Financing Decision |
(IV) Capital Budgeting |
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A)-(IV), (B)-(II), (C)-(I), (D)-(III)
(A) Long-term Investment Decision — this matches (IV) Capital Budgeting. A long-term investment decision is also called a capital budgeting decision.
(B) Working Capital Decision — this matches (II) Cash Management. Working capital decisions are about the levels of cash, inventory and receivables. Efficient cash management is a key part of working capital management.
(C) Fixed Capital Decision — this matches (I) Choice of Technique. Choice of technique is a factor affecting the requirement of fixed capital. A firm that uses more machines (capital intensive) needs more fixed capital than a firm that uses more labour.
(D) Financing Decision — this matches (III) Raising capital by issuing shares/debentures. The financing decision is about how much money to raise and from which source, such as shares (owners’ funds) or debentures (borrowed funds).
Capital budgeting also concerns fixed assets, but only Option (1) matches all four pairs.
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. …” “…Short-term investment decisions (also called working capital decisions) are concerned with the decisions about the levels of cash, inventory and receivables. These decisions affect the day-to-day working of a business. These affect the liquidity as well as profitability of a business. Efficient cash management, inventory management and receivables management are essential ingredients of sound working capital management.” “Financing Decision … It involves identification of various available sources. The main sources of funds for a firm are shareholders’ funds and borrowed funds. The shareholders’ funds refer to the equity capital and the retained earnings. Borrowed funds refer to the finance raised through debentures or other forms of debt. …” “Management of Fixed Capital Fixed capital refers to investment in long-term assets. Management of fixed capital involves allocation of 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. …” “Choice of Technique: Some organisations are capital intensive whereas others are labour intensive. A capital-intensive organisation requires higher investment in plant and machinery as it relies less on manual labour. The requirement of fixed capital for such organisations would be higher. …” |