In the 3rd reason i.e. when stock market is bullish equity should be prefered but in the answer key issued by cbse they said debt will be prefered when stock market is bullish ?? & in part b factors affecting financial decisions should be stated but in answer key they have given random factors so which one should be stated if such type of question comes in exam ?

Dear Student,

Answer provided for first part is exactly correct as company will never prefer Debt in above mentioned situations and in the third reason, when the market is bullish which means market is rising and when the market is rising every investor wants  to earn profit through rising prices. Investors never prefer debt, when the market is bullish.

If this question comes in your exam, state factors out of the following:
Tax Rate
Cost of Equity
Floatation Cost
Control Consideration
Return on Investment


  • 1
Bullish Phase means Boom Perod in stock market through which equity would be profitable for the investor.
  • 1
I know what bullish means but in the marking scheme cbse has written during the bullish phase company should choose debt but that is wrong
  • 0
What are you looking for?