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.
The father has consulted Financial Consultants to help with which decision?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Financing
Option (1) Financing — Correct. The father wanted the consultants to help with “various sources of funds”. The financing decision is about how much money to raise and from which sources, such as shares, debentures or loans, keeping in view the cost and risk of each.
Option (2) Investment — Incorrect. The investment decision, buying the packaging machinery, had already been taken by Sehaj. The consultants were brought in to find the money for it.
Option (3) Dividend — Incorrect. The passage does not speak of sharing profit with the owners.
Option (4) Marketing — Incorrect. Marketing is not a financial decision, and financial consultants are not hired for it.
NCERT (2026-27 Edition): “Financing Decision This decision is about the quantum of finance to be raised from various long-term sources. Short-term sources are studied under the ‘working capital management’. It involves identification of various available sources. The main sources of funds for a firm are shareholders’ funds and borrowed funds. …” |