Explain any four factors affecting financial decision.

1.	Explain any four factors affecting financial decision.
Answer» Factors affecting Financing Decision. In practice, some of the important factors affecting the financing decisions stated below: Cost – the cost of each type of finance is estimated and the source which involves the least cost should be chosen by the financial manger. Risk – The associated risk is different for each source e.g. the risk involved in raising debt capital is higher than equity. Floatation Costs – A source of finance involving less floatation cost is considered to be more preferable. Cash flow position of the business – If the cash flow position of a business is good it should opt for debt else equity. level of fixed operating costs – If the fixed operating cost of a business is low it should opt for debt else equity.

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Factors affecting Financing Decision.

In practice, some of the important factors affecting the financing decisions stated below:

Cost – the cost of each type of finance is estimated and the source which involves the least cost should be chosen by the financial manger.
Risk – The associated risk is different for each source e.g. the risk involved in raising debt capital is higher than equity.
Floatation Costs – A source of finance involving less floatation cost is considered to be more preferable.
Cash flow position of the business – If the cash flow position of a business is good it should opt for debt else equity.
level of fixed operating costs – If the fixed operating cost of a business is low it should opt for debt else equity.

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Explain any four factors affecting financial decision.

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