Why should the investment decision be separate from the financing
decision? What error would...

Question

Why should the investment decision be separate from the financing
decision? What error would businesses make if they did not separate these type of decisions? Why is it sometimes difficult to separate these decision?Please use outside sources

Neha · Accepted Answer

Solution:
Investment Decision tells us where to invest funds in order to get maximum benefits for the business.  It determines the composition of assets to be held. So Investment Decision can be basically Long term which include investment in fixed assets like buying machinery, purchasing land etc.; and Short Term which include buying Inventory etc. for day to day activities. 
However these assets are not free. So here comes into picture the financing decision which tells us about the source from which funds will be raised.

Why should the investment decision be separate from the financing decision? What error would businesses make if they did not separate these type of decisions? Why is it sometimes difficult to separate...

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