Match the following lists.
| LIST I | LIST II |
| A) Cash flow positions | I) In bullish market- shares are easily sold even at high price |
| B) Regulatory framework | II) Cash flow payments must have sufficient buffer stock |
| C) Stock market conditions | III) Debt-equity ratios of other companies in the same industry |
| D) Capital structure of other companies | IV) Public issue of shares and debenture have to be made under SEBI |
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 1
The correct answer is option 1- A-II, B-IV, C-I, D-III.
| LIST I | LIST II |
| A) Cash flow positions | II) Cash flow payments must have sufficient buffer stock |
| B) Regulatory framework | IV) Public issue of shares and debenture have to be made under SEBI |
| C) Stock market conditions | I) In bullish market- shares are easily sold even at high price |
| D) Capital structure of other companies | III) Debt-equity ratios of other companies in the same industry |
Cash flow positions: Cash flows must not only cover fixed cash payment obligations but there must be sufficient buffer also.
Regulatory framework: Every company operates within a regulatory framework provided by the law e.g., public issue of shares and debentures have to be made under SEBI guidelines.
Stock market conditions: If the stock markets are bullish, equity shares are more easily sold even at a higher price. However, during a bearish phase, a company, may find raising of equity capital more difficult and it may opt for debt.
Capital structure of other companies: A useful guideline in the capital structure planning is the debt equity ratios of other companies in the same industry. There are usually some industry norms which may help.