The nature of financial decisions would be clear when we try to understand the operation of a firm. At the very outset, the promoter makes an appraisal of various investment proposals and selects one or more of them, depending upon the net benefit derived from each as well as on the availability of funds. When a particular project is selected or the area of operation is finalised, the requirements for long-term assets as well as current assets are determined, and accordingly, the quantum and the sources of finance are sorted out. The firm raises funds to finance fixed assets like land and building, plant and machinery, etc., and current assets like inventory, etc. The operation starts. An optimum trade-off between ...

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