During a bearish phase of stock market, company should make use of ____.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Debentures
Option (1) Equity share — Incorrect. In a bearish phase of the stock market, raising equity capital is more difficult.
Option (2) Debentures — Correct. During a bearish phase, a company may find raising of equity capital more difficult and it may opt for debt. Debentures are a form of debt.
Option (3) Retained profits — Incorrect. Retained profits come from the firm’s own earnings. They do not depend on stock market conditions.
Option (4) Equity shares and preference shares — Incorrect. Both are owners’ funds, which are hard to raise in a bearish market.
NCERT (2026-27 Edition): “13. Stock Market Conditions: If the stock markets are bullish, equity shares are more easily sold even at a higher price. Use of equity is often preferred by companies in such a situation. However, during a bearish phase, a company, may find raising of equity capital more difficult and it may opt for debt. Thus, stock market conditions often affect the choice between the two.” |