Q1:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Investment decision
Concept Field: N/A

Purchase of fixed assets falls under ___________.

A. Investment decision
B. Financing decision
C. Dividend decision
D. None
Solution: A
Explanation- Investment decision is the process where decision regarding utilization of
procured or raised funds is taken. This involves decision regarding the purchase of fixed or
long-term assets.

Q2:

Question Type: Concept

Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Investment decision
Concept Field: N/A

Identify the decision that belongs to investment.

A. To decide about the proportion of profit that is to be retained
B. Replacement of existing machine with the new machine
C. Quantum of funds to be raised
D. Dividend distribution decision
Solution: B
Explanation- Investment decision is related to the capital budgeting decision where
investment in long-term assets is considered. Replacement of existing machine with the new
machine is an example of investment decision.

Q3:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Investment decision
Concept Field: N/A

Investment decision is important due to_____.

A. Lack of resources availability
B. To earn maximum profit from the investment done
C. Both A and B
D. None of the above
Solution: C
Explanation- Investment decision is concerned with the choice of investment proposal
among other alternatives. This is due to the scarcity of resources and it is important to earn
maximum profit.
Q4:

Question Type: Concept

Question Variety: Text Based
Difficulty: Hard
Expected Time to Solve (in seconds):120
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Investment decision
Concept Field: N/A

Assertion (A): Any decision that is concerned about the choice of best investment proposal is
referred as investment decision.
Reason (R): Effective investment decision can be made by using capital budgeting
techniques.
Choose the correct answer from the following code:
A. Both (A) and (R) are true and (R) is the correct explanation of (A).
B. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Solution: A
Explanation- Investment decision is the decision that is concerned with the choice of best
investment proposal. Investment proposals can be evaluated by using capital budgeting
techniques.
Q5:

Question Type: Conceptual

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Investment decision
Concept Field: N/A

Investment decision can be _______.

A. Long-term
B. Short-term
C. Both A and B
D. None of the above
Solution: C
Explanation- The firm may choose to invest for long-term and for short-term based on its
financial needs. Therefore, investment decision can be for long-term and for short term.
Q6:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Investment decision
Concept Field: N/A

The long-term investment decision can be called as______.

A. Capital budgeting decision
B. Financing decision
C. Working capital decision
D. None of them

Solution: A
Explanation- Investment decision can be classified as long-term decision and short-term
decisions. Long-term investment decisions are called as capital budgeting decisions as capital
budgeting decision are generally taken for long-term investments.

Q7:

Question Type: Concept

Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Investment decision
Concept Field: N/A

Identify the factors that are affected by capital budgeting decisions.

A. Competitiveness
B. Profitability
C. Size of the assets
D. All of the above
Solution: D
Explanation- Investment decision is important as they may affect the earning capacity of the
firm. It may affect various factors such as profitability, competitiveness, size of the assets,
etc.

Q8:

Question Type: Concept

Question Variety: Text Based
Difficulty: Hard
Expected Time to Solve (in seconds):120
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Investment decision
Concept Field: N/A

Identify the incorrect statement.

Codes:
I. Investment decision involves short-term and long-term decisions.
II. The short-term decisions are also known as capital budgeting decisions.
III. Working capital requirement are dealt under long-term investment decisions.
IV. Purchase of new machine is an example of capital budgeting decision.
Options:
A. Statement I and II are incorrect
B. Statement II and III are incorrect
C. Statement II, III and IV are incorrect
D. All statements are correct
Solution: B
Explanation- Investment decision involves short-term and long-term decisions. The long-
term decisions are also known as capital budgeting decisions. Working capital requirement
influences the short-term investment decisions. Purchase of new machine is an example of
capital budgeting decision or long-term decisions.
Q9:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Investment decision
Concept Field: N/A

Short-term investment decisions are also known as _____________.

A. Capital budgeting decision
B. Financing decision
C. Working capital decision
D. None of them
Solution: C
Explanation- Working capital decisions are the decisions that are taken for short-term
purposes. Therefore, short-term investment decisions are also called as working-capital
decisions.

Q10:

Question Type: Conceptual

Question Variety: Text Based
Difficulty: Hard
Expected Time to Solve (in seconds):120
Topic: Business finance and marketing
Concept: Financial management
Sub Concept: Investment decision
Concept Field: N/A

Assertion (A): Working capital decisions affect the day-to-day operations of the firm.
Reason (R): The major concern of working capital decisions involves liquidity or cash
management, inventory management and receivables management.
Choose the correct answer from the following code:
A. Both (A) and (R) are true and (R) is the correct explanation of (A).
B. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Solution: A
Explanation- Working capital decisions affect the day-to-day operations of the firm as these
decisions affect the firm’s liquidity and profitability. Working capital decisions are concerned
with liquidity or cash management, inventory management and receivables management.