Page 62 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Chapter 3

1.2 Links between these three decisions

When deciding which investments to undertake, the entity needs to
decide how finance will be raised.

If large amounts of finance are available, this will enable the entity to
undertake more/better investments. If investments generate lots of
cash, this will enable the entity to pay large dividends.

If more equity finance is raised, higher cash levels will be needed for
dividends to satisfy the shareholders.

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