Question:
Alka Motors is one of the leading automobile companies in India. Due to growing demand for electric vehicles, Alka Motors planned to expand its business and for this, it wanted to raise funds. The finance manager suggested that it should raise funds through equity as the market was bullish. As per the suggestion of finance manager, the company decided to raise \( \text{₹ } 3,500 \) crore from equity for its expansion plan for electric vehicles.
The factor that the finance manager took into consideration to raise funds through equity was :
Alka Motors is one of the leading automobile companies in India. Due to growing demand for electric vehicles, Alka Motors planned to expand its business and for this, it wanted to raise funds. The finance manager suggested that it should raise funds through equity as the market was bullish. As per the suggestion of finance manager, the company decided to raise \( \text{₹ } 3,500 \) crore from equity for its expansion plan for electric vehicles.
The factor that the finance manager took into consideration to raise funds through equity was :
The factor that the finance manager took into consideration to raise funds through equity was :
Show Hint
Issue Equity when the market is Bullish to capitalize on high investor sentiment.
Use Debt when the market is Bearish, as equity might not attract enough buyers.
Bullish markets usually lead to lower flotation costs for equity.
Updated On: Jul 18, 2026
- Cash flow position
- Flexibility
- Cost of debt
- Stock-market conditions
Show Solution
Verified By Collegedunia
The Correct Option is D
Solution and Explanation
Concept:
• Financing Decision: This involves deciding how much fund to raise from various long-term sources.
• Factors Affecting Capital Structure: Includes cost, risk, flotation costs, and stock market conditions.
• Bullish vs Bearish Market: Bullish means stock prices are rising; Bearish means they are falling.
Step 1: Extract the reasoning used by the Finance Manager
The manager recommended equity because "the market was bullish".
Step 2: Define the significance of a Bullish market
In a bullish market, investors are optimistic and stock prices are generally high.
This makes it the ideal time for companies to issue new equity shares as they can get a better price with less effort.
Step 3: Compare with other factors
Cash flow position refers to the ability to pay interest, which is not mentioned here.
Flexibility refers to keeping a reserve of borrowing power.
Cost of debt relates to interest rates, which is not the focus of the case.
Step 4: Match the reasoning to the correct factor
Since the decision was based entirely on the state of the stock exchange (bullish phase), the factor is Stock-market conditions.
• Financing Decision: This involves deciding how much fund to raise from various long-term sources.
• Factors Affecting Capital Structure: Includes cost, risk, flotation costs, and stock market conditions.
• Bullish vs Bearish Market: Bullish means stock prices are rising; Bearish means they are falling.
Step 1: Extract the reasoning used by the Finance Manager
The manager recommended equity because "the market was bullish".
Step 2: Define the significance of a Bullish market
In a bullish market, investors are optimistic and stock prices are generally high.
This makes it the ideal time for companies to issue new equity shares as they can get a better price with less effort.
Step 3: Compare with other factors
Cash flow position refers to the ability to pay interest, which is not mentioned here.
Flexibility refers to keeping a reserve of borrowing power.
Cost of debt relates to interest rates, which is not the focus of the case.
Step 4: Match the reasoning to the correct factor
Since the decision was based entirely on the state of the stock exchange (bullish phase), the factor is Stock-market conditions.
Was this answer helpful?
0
0
Top CBSE CLASS XII Business Studies Questions
What is the Planning Process?
- ................ is one of the most important attitudes of an entrepreneur, which is defined as the ability to continue to do something, even when it is difficult.
(A) Decisiveness
(B) Interpersonal skills
(C) Perseverance
(D) Taking initiative - Mention any four most common environmental barriers which an entrepreneur may face while running his/her venture.
- ____is the process of searching for prospective employees and stimulating them to apply for jobs in the organization.
‘Vishesh Constructions’, a construction company, decided to strictly implement ‘No Helmet, No Entry’ and put the following sign at their construction sites :
Identify the type of plan indicated by the above sign :
View More Questions
Top CBSE CLASS XII Business Finance Questions
Top CBSE CLASS XII Questions
- 2, b, c are in A.P. and the range of determinant $\begin{vmatrix}1&1&1\\ 2&b&c\\ 4&b^{2}&c^{2}\end{vmatrix}$ is [2, 16]. Then find range of c is
- A boy of mass 50 kg is standing at one end of a, boat of length 9 m and mass 400 kg. He runs to the other, end. The distance through which the centre of mass of the boat boy system moves is
- A capillary tube of radius r is dipped inside a large vessel of water. The mass of water raised above water level is M. If the radius of capillary is doubled, the mass of water inside capillary will be
- A circular disc is rotating about its own axis. An external opposing torque 0.02 Nm is applied on the disc by which it comes rest in 5 seconds. The initial angular momentum of disc is
- A circular disc is rotating about its own axis at uniform angular velocity \(\omega.\) The disc is subjected to uniform angular retardation by which its angular velocity is decreased to \(\frac {\omega}{2}\) during 120 rotations. The number of rotations further made by it before coming to rest is
View More Questions