Sehaj joined his father’s business of Organic masalas, near Baddi in Himachal after completing his MBA. In order to capture a major share of the market, he decided to sell the product in small attractive packages by using the latest packaging technology and machinery. He believed that this project has huge financial potential in terms of sales and cash flows. Father asked Sehaj to prepare a financial blueprint for the organization’s future operations. His father suggested that they hire financial consultants to help them with various sources of funds. The consultant enlisted various sources of finance and their associated costs of public issue to determine the optimal source(s) of finance. The consultant also referred to certain guidelines issued by SEBI.
Which financial decision is highlighted in the line, “In order to capture a major share of the market, he decided to sell the product in small attractive packages by using the latest packaging technology and machinery.”
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Investment
Option (1) Financing — Incorrect. The financing decision is about where the money comes from. This line speaks of what the money is spent on.
Option (2) Investment — Correct. Sehaj decided to buy the latest packaging technology and machinery. Spending on fixed assets that will give returns for many years is a long-term investment decision, also called capital budgeting.
Option (3) Dividend — Incorrect. The dividend decision is about how much of the profit is paid to the owners and how much is kept in the business.
Option (4) Marketing — Incorrect. Selling in attractive packages is a marketing idea, but marketing is not one of the three financial decisions: investment, financing and dividend.
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. 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. …” |