The correct answer is D. 2, 4 and 5.
The main objectives of financing decision are to get optimal capital structure, keep the cost of capital lowest, and make the value of share highest.
- Optimal capital structure is the mix of debt and equity that minimizes the firm’s cost of capital.
- The cost of capital is the rate of return that a company must earn on its investments in order to satisfy its investors.
- The value of a share is the price at which a share of stock is currently trading on the stock market.
Option 1 is incorrect because working capital is not a financing decision. Working capital is the difference between a company’s current assets and its current liabilities. It is a measure of a company’s liquidity.
Option 3 is incorrect because making the company exposed to high risk is not a financing decision. The level of risk that a company takes is a strategic decision. It is determined by the company’s business model, its industry, and its competitive environment.
Option 5 is incorrect because making the value of share highest is not a financing decision. The value of a share is determined by the market, and it is influenced by a variety of factors, including the company’s financial performance, its growth prospects, and its risk profile.