The financing decisions are affected by various factors. Some of them are as follows:
A. Risk associated with each source
B. Cash flow position of competing company
C. Floatation costs
D. Stability of earnings
Choose the correct answer from the options given below:
The financing decisions are affected by various factors. Some of them are as follows:
A. Risk associated with each source
B. Cash flow position of competing company
C. Floatation costs
D. Stability of earnings
Choose the correct answer from the options given below:
Solution
Factors affecting the financing decision include cost, risk associated with each source (A), floatation costs (C), cash flow position of the company itself, fixed operating costs, control considerations and the state of the capital market. The cash flow position of a competing company (B) is irrelevant, and stability of earnings (D) is a factor affecting the dividend decision. Hence A and C only.
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