The factors affecting capital structure decisions are: (A) Fiscal pol…

The correct answer is option 4- (B), (C) and (D) only.

• (B) Stock market conditions — Favorable market conditions encourage companies to issue shares, while unfavorable conditions may push them toward debt financing.
• (C) Control — Companies consider whether raising funds through equity will dilute ownership and control.
• (D) Risk considerations — Higher debt increases financial risk, so firms carefully evaluate risk while deciding the capital structure.

Note: The given answer is as per NTA. However, there appears to be some ambiguity with respect to Statement (A). As per NCERT, “Tax Rate” is specifically mentioned as a factor affecting capital structure because higher tax rates make debt financing relatively cheaper due to the tax deductibility of interest. “Fiscal Policy,” however, is a much broader macroeconomic concept that includes taxation, government expenditure, borrowing, etc. Since taxation policy forms a part of fiscal policy, Statement (A) may be interpreted indirectly as correct. However, strictly according to NCERT terminology, “Fiscal Policy” itself is not explicitly listed as a factor affecting capital structure. Therefore, Option 4 appears more appropriate from the NCERT perspective, although Option 1 may also be considered correct if fiscal policy is interpreted in the broader sense to include taxation policy.