A company wants to establish a new unit in which a machinery of worth Rs.10 lakh is involved. Identify the type of decision involved in financial management.

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Solution

Investment decision: The investment decision relates to how the firm’s funds are invested in different assets. Investment decision may be long-term or short-term. Long-term investment decision is called capital budgeting decision and short-term investment decision is called working capital decision.

Therefore, it is a capital budgeting decision.

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