Read the following Case Study and answer the question.

Aryan is a CEO of RS Infotech Ltd., which is a company working in the technology sector for the last 55 years. The company is doing very well in this sector and now has a growth plan of entering into cosmetics market.

Keeping in view the changing tastes and preferences Of customers, it is planning to enter organic products market.

The company targets to achieve 20% of market share in the first 2 years of its entry.

For financial issues, Aryan consulted his chief finance officer, Raj and found that it requires 50 crores of additional capital for setting up a separate cosmetics division.

The Company plans to arrange this money by issuing equity shares in the market but it lacks sufficient cash to bear the floatation cost and hence planned to approach the financial market for the same.

Name the financial decision which the company is going to make while arranging the source for required funds.

Financing decision

The correct answer is option 2- Financing decision.

The financial decision the company is making while arranging the source for required funds is the Financing decision.

Financing 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. 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. A firm has to decide the proportion of funds to be raised from either sources, based on their basic characteristics