3 30 points Financial Manager makes various types of decisio

3. (30 points) Financial Manager makes various types of decisions related to different aspects of a company\'s operations. Determine whether each of the following decisions is a Capital Budgeting, Capital Structure or a Net Working Capital management decision. Note that each case may affect more than one decision a) Buying a warehouse with cash. b) Deciding whether to borrow short term from a financial institution versus issuing bonds c) Deciding whether to acquire a smaller competitor.

Solution

a. Buying a warehouse is a capital budgeting decision, since it involves cash outlay it affects working capital of the firm

b. short tem loan is a working capital decision, where as issuing bonds is capital structure decision

c. acquiring a competitor is a capital budgeting decision as well a capital structure decision.