Question:
Explain the following as factors affecting ’Financing Decision’:
(b) Fixed operating costs
(ii) Cash flow position of the company
Explain the following as factors affecting ’Financing Decision’:
(b) Fixed operating costs
(ii) Cash flow position of the company
(b) Fixed operating costs
(ii) Cash flow position of the company
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Financing decisions based on cash flow
Updated On: Feb 21, 2025
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Solution and Explanation
Fixed Operating Costs: High fixed costs increase financial risk and may lead to difficulties in fulfilling financial obligations. Low fixed operating costs may lead to more debt financing. Cash Flow Position: A strong cash flow allows debt financing, while weak cash flow may force a company to prefer equity financing to avoid fixed repayments.
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