A company is evaluating whether to invest R1 million in new
machinery that is expected to increase production and revenue. The management
must consider the possibility that the projected revenue may not materialise,
compare the benefits of the investment against its total cost, and account for
the fact that the money could otherwise earn interest in a bank. Which financial
management principles are being applied in this decision?

Question

A company is evaluating whether to invest R1 million in new
machinery that is expected to increase production and revenue. The management
must consider the possibility that the projected revenue may not materialise,
compare the benefits of the investment against its total cost, and account for
the fact that the money could otherwise earn interest in a bank. Which  financial
management principles  are being applied in this decision?

Answer

Cost–volume–profit principle, break-even principle, and working capital principle

Answer

Risk–return principle, cost–benefit principle, and time value of money principle

Answer

Liquidity principle, solvency principle, and profitability principle

Answer

Short-term objective principle, long-term objective principle, and risk principle

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