Question:
Which of the following is NOT a factor affecting 'financing decision' ?
Which of the following is NOT a factor affecting 'financing decision' ?
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Financing decisions always relate to capital structure (debt/equity mix). Strategy questions test business expansion choices.
Updated On: Jun 21, 2025
- Fixed operating costs
- Cash flow position
- Control considerations
- Diversification
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The Correct Option is D
Solution and Explanation
Diversification is a strategic decision, not directly a financing factor because:
1. Financing Decision Factors: - (A) Fixed costs: Impacts debt capacity - (B) Cash flow: Determines repayment ability - (C) Control: Equity vs debt dilution effects
2. Diversification Aspects: - Business portfolio strategy - Risk management tool - Implemented through investment decisions
3. Financial Management Context: - Financing decisions concern capital structure - Diversification affects asset allocation
Final Answer: (D) Diversification
1. Financing Decision Factors: - (A) Fixed costs: Impacts debt capacity - (B) Cash flow: Determines repayment ability - (C) Control: Equity vs debt dilution effects
2. Diversification Aspects: - Business portfolio strategy - Risk management tool - Implemented through investment decisions
3. Financial Management Context: - Financing decisions concern capital structure - Diversification affects asset allocation
Final Answer: (D) Diversification
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