Which financial decision primarily evaluates the purchase of a new factory expected to operate for ten years?
Correct answer: D. Capital budgeting
- A. Working capital management
- B. Cash collection control
- C. Dividend administration
- D. Capital budgeting
Explanation
Capital budgeting evaluates long-term investments such as factories, machinery and major expansion projects. Working capital management concerns short-term assets and liabilities used in daily operations, not primarily ten-year investments.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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