Question

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

Options

• Cash flow position

• Return on investment

• Financing alternatives

• Stock market conditions

Answer 1

Financing alternatives

Explanation:

While a company evaluates various sources of funds, “Financing alternatives” is the outcome of the decision process rather than a specific economic variable. In contrast, factors such as Cash Flow Position, ROI, and Stock Market Conditions are specific constraints and indicators that determine whether a company can afford the risk of debt or should opt for the safety of equity to maintain a healthy debt-to-equity ratio.