Question

1. That a company chooses a new product to introduce into the market is a_______​decision.a. capital budgeting.b. capital structure.c. working capital management. 2. That a company chooses to sell a bond to finance the new product is a_______decision.a. capital budgeting.b. capital structure.c. working capital management.3. That a company sets production and inventory levels on the new product is a_______decision.a. capital budgeting.b. capital structure.c. working capital management. ​

Answer 1

Answer

1. A) Capital budgeting
2. B) Capital Structure
3. C) working capital management

Explanation:

• Capital Budgeting: The new product requires investments, therefore businesses are more likely to evaluate the decision of preceding it. So, in brief, it's a method used by companies to assess if a new product should be introduced or not.

Since the company has opted to launch the new product, it has made a capital budgeting decision. In which the company has assessed the risks, benefits and costs associated with the product.

Capital Structure: As the name reflects, businesses have a structure which is a mix of debt + equity to finance the company. Company obliges to identify that where it's investment would come from by assessing its capital after the new product decision is made.

Hence, when company sells it's stock, it is basically creating an investment for its new product.

Working capital management: A process through which companies ensure efficient and effective operations by assessing and managing their working capital. Working capital includes current assets (highly liquid assets) and liabilities.

Therefore, when the company sets its inventory and production levels, it is trying to make its production efficient and effective with sufficient inventory at hand.