Business Studies

Business Finance

Easy

Name the Financial Decision which determines the capital structure of the company.

Investment Decision

Financing Decision

Dividend Decision

Capital Budgeting Decision

✅ Correct Option: 2

Option 1 -> Investment Decision relates to allocation of funds in various assets and projects, not the mix of debt and equity.

Option 2 -> Financing Decision determines how funds are raised (debt vs equity mix), which directly establishes the capital structure.

Option 3 -> Dividend Decision concerns profit distribution to shareholders versus retention, not the debt-equity composition.

Option 4 -> Capital Budgeting Decision focuses on long-term investment evaluation, not how capital is sourced.

Hence, Option 2: Financing Decision -> This decision determines the optimal mix of debt and equity financing that a company uses to fund its operations, which directly forms the capital structure of the organization -> correct

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Solution

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