Question

Which set of outcomes is affected by a financing decision?

Options

• Cost of capital, financial risk, control of existing owners, and the ability to meet fixed payments

• Only cost of capital and floatation cost

• Only retained earnings and working-capital management

• Only control of existing owners and investor sentiment

Answer 1

A financing decision affects the cost of capital, financial risk, and control of existing owners. It also affects the business’s ability to meet fixed payments.