Read the following Case Study and answer, 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

(2) Financing decision.

The financing decision involves determining the most suitable capital structure for the company, which includes deciding how to raise funds to meet its financial requirements.

In this case, RS Infotech is planning to issue equity shares in the market to raise the required 50 crores of additional capital for its new cosmetics division. This decision regarding the method of financing, whether through equity, debt, or other financial instruments, falls under the category of financing decision.

(1) Investment Decision :

• The investment decision involves identifying potential opportunities for investment that will yield profitable returns for the company. It includes assessing different investment options, analyzing their potential risks and returns, and selecting the most suitable investment projects.

(3) Capital Structure:

• Capital structure refers to the composition of a company's liabilities, including debt and equity. The decision regarding the company's capital structure involves determining the appropriate mix of debt and equity that will be used to fund the company's operations and growth. While issuing equity shares impacts the capital structure, the immediate need for arranging funds for the new cosmetics division pertains more to the financing decision.

(4) Dividend Decision :

• The dividend decision involves determining the portion of a company's profits that will be distributed to shareholders as dividends and the portion that will be retained for reinvestment in the business.