The correct answer is option 2- A-III, B-IV, C-I, D-II.
| LIST I |
LIST II |
| A) Business finance |
III) Money required for carrying out business activities |
| B) Financing decision |
IV) Quantum of finance raised from various long-term sources |
| C) Investment decision |
I) Working capital decision |
| D) Financial management |
II) Optimal procurement as well as usage of finance |
- Business finance: Almost all business activities require some finance. Finance is needed to establish a business, to run it, to modernize it, to expand, or diversify it. Money required for carrying out business activities is called business finance.
- Financing decision: This decision is about the quantum of finance to be raised from various long-term sources. 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.
- Investment decision: Investment decision can be long-term or short-term. A long-term investment decision is also called a Capital Budgeting decision. Short-term investment decisions (also called working capital decisions) are concerned with the decisions about the levels of cash, inventory and receivables.
- Financial management: All finance comes at some cost. It is quite imperative that it needs to be carefully managed. Financial Management is concerned with optimal procurement as well as the usage of finance. Financial Management aims at reducing the cost of funds procured, keeping the risk under control and achieving effective deployment of such funds.
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