Question

Name the dcison taken by a financial manager which determines the boerall cost of capital and the fiinancial risk of the enterprise. Explain any two factors which affect any decsion .

Answer 1

It is the financing decisions that affects the overall cost of capital and financial risk for the enterprise. The following are two of the factors affecting this decision.
1. Cost: Different sources of funds involve different costs. Normally, those sources of funds are opted which prove to be cheapest.
2. Cash flow position: A strong cash flow position implies that debt is more viable than equity and vice-versa.