Financial decision

Common points for Investing/Financing/Dividend decision - Ch9: 1.Cost 2.Risk 3.Rate of Return

Here’s a simple explanation for CBSE Class 12 students:

Investing Decision: When a company buys new machines, land, or buildings, it must check if the cost is affordable and worth it.
Financing Decision: If a company takes a loan, it has to pay interest. If it raises money from shareholders, it may have to share profits. So, the company chooses the cheapest and best option.
Dividend Decision: If a company gives more dividends (profit share) to shareholders, it will have less money for growth.

Investing Decision: If a company invests in a new business, it may or may not succeed. There is always a risk of loss.
Financing Decision: Taking a loan increases risk because the company must repay it on time. If it sells shares, there is less risk but less control over the company.
Dividend Decision: If the company gives high dividends and then faces losses, it may struggle to manage expenses.

Investing Decision: Before investing money, a company checks how much profit it can make. If profits are higher than costs, the investment is good.
Financing Decision: If a company takes a loan, it should earn more profit than the interest it pays. Otherwise, it’s a bad decision.
Dividend Decision: Shareholders expect returns, either through dividends or by increasing the company’s value. The company must balance both to keep investors happy.

In short, every decision should be cost-effective, less risky, and profitable for the company.