Question

Which of the following is not a factor affecting capital structure of a company ?

• A. Cash flow position
• B. Return on investment
• C. Financing alternatives
• D. Stock market conditions

Hint:

Capital structure factors are usually "pressures" like tax rates, interest coverage, or control considerations.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Capital structure refers to the specific mix of debt and equity used to finance a company's assets. Factors affecting this decision usually relate to cost, risk, and market flexibility.
Step 2: Detailed Explanation:
While a company considers different sources of finance, "Financing alternatives" is a broad term for the choices themselves rather than a specific factor or constraint that dictates the ratio of debt to equity. Factors like Cash Flow (ability to pay debt) and ROI (profitability relative to interest) are specific variables that force a decision one way or the other.
Step 3: Final Answer:
The correct option is (c).