Question

Which of the following decisions is most likely to affect a firm’s capital structure and is therefore a financing decision? A) acquiring another company using cash B) spend $7.6 billion on research and development C) issue new corporate bonds

Answer 1

Option A) Acquiring Another Company using Cash : Acquiring another company is very big decission becasue this will required a huge amount for the investment and Acquisttion company acquires all the assets and liability of acquiring company so there is huge impact on companies cash flow because of acquisition.

Option B: Spend $ 7.6 Billion on research : Spending on research is the deferred cost of the company and it required for researching a new things or technology etc., But invested in this amount required is step by step so this will impact on the financing decission but not more becasue the company invest the money step by step.

Option C: Issue of new corporate bonds are used to meet the short term laibilities or medium term liabilities of the company so it will only hep to the organization for liquidity only so this will not great impact on the financial decission of the company.

As per the all of above only Acquiring another company required only huge amount and this have the great effect on the financial decission of the company.

So, answer = Option A = Acquiring another company using cash