"The Financial Consultant advised her about the judicious mix of equity (40%) and Debt (60%)." Identify the concept of Financial Management as reflected in the above situation.
Show Hint
A mix of debt and equity is called capital structure.
Step 1: Understanding the Question:
The consultant suggested 40 percent equity and 60 percent debt. We need the term for such a mix of long term funds.
Step 2: Key Concept:
Capital structure is the proportion of owners' funds (equity) and borrowed funds (debt) used to finance a business. Choosing this proportion is a financing decision.
Step 3: Check option (A).
An investing decision is about where to put funds, such as which assets or projects to buy. The line talks about sources of funds, not their use. So (A) is wrong.
Step 4: Check option (B).
The line gives a ratio between equity and debt. That ratio is exactly what capital structure means. So (B) is right.
Step 5: Check option (C).
A dividend decision is about how much profit to pay to shareholders and how much to keep. No profit sharing is mentioned. So (C) is wrong.
Step 6: Check option (D).
Finance outlay is not a standard financial management decision. It only suggests spending, and the line is not about spending. So (D) is wrong.
Final Answer:
The 40:60 mix of equity and debt is the capital structure, option 2.
\[ \boxed{\text{Option 2}} \]
