Financing Fixed Assets Decision: An Analysis

Abstract

The investment in fixed assets is imperative for carrying out the operating activities of a business concern. It determines the profitability, growth, risk reduction and social goals of the business concern. Financing fixed assets is a challenging task. This is true especially in the case of manufacturing concerns. Financing fixed assets is one of the significant aspects of fixed assets management. It requires a large cash outlay and, thus, involves a crucial financial decision. It is very difficult to reverse after the decision has been taken. The financial manager, therefore, has to take such a decision with utmost care. The present paper focuses on the real corporate world practices regarding financing fixed assets decision in the management of fixed assets. The main aim is to enlighten the shareholders, creditors, investors, bankers, prospective entrepreneurs, students and academicians relating to financing fixed assets decision and its implications. The study would reveal how far, the risk and return associated with the financing mix and a trade-off between risk and return will result in an acceptable financing strategy for most of business concerns.