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Select the factors to be considered while making financing decisions in a company:

(A) Fixed operating costs

(B) Cash Flow Position

(C) Stability of Earnings

(D) State of Capital Markets

Choose the correct answer from the options given below:

Solution

✅ Correct Option: 1

Factors affecting the financing decision include fixed operating costs (high fixed costs reduce the capacity to use debt), cash flow position (strong cash flows support debt) and the state of capital markets (market conditions affect the choice of source). Stability of earnings is a factor affecting the dividend decision, not the financing decision. Hence (A), (B) and (D) only.

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