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Question
Explain the following as factor affecting 'financing decision'.
State of capital markets
Solution
State of the capital market: During the boom period, it is easy to receive funds through equity. On the other hand, during a depression, it becomes difficult to receive funds through equity. Under such circumstances, it is preferable to receive funds through debt.
Bullish Market: Equity preferred
Bearish Market: Debt preferred
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- State any three factors affecting the decision identified in (i) above.
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