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Explain the… (Class 12 Business Studies SQP 2026-27, Q23A)

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Business StudiesCBSE Class 12 · Sample paper, session 2026-27 · 3 marks · Short answer

CBSE Class 12 Business Studies sample paper 2026-27: question 23(A)

From the official CBSE sample question paper for 2026-27, section A, question 23(A), for 3 marks. Try it first; the hints and our step-by-step solution are below.

Q23(A) · 3 marks · Short answerFinancial Management

Explain the following factors affecting financing decision of a company :
(a) Control considerations
(b) State of capital market

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2026-27.

Hints

Open one hint at a time and try again before the next.

Hint 1

Who gets voting rights: shareholders or debenture holders?

Hint 2

How does a booming market affect equity issues?

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. (a) Control considerations: Issuing more equity can dilute the existing management's control, while debt does not; firms that fear a takeover prefer debt to equity.

    1½ marks

  2. (b) State of capital market: When the stock market is rising, more people invest in equity and shares are easy to issue; a depressed market makes equity issues difficult, so firms lean on debt.

    1½ marks

Answer: Control considerations favour debt when dilution of control is feared; a buoyant capital market makes equity easier, a depressed one makes it harder.

Where the marks are

  • Each factor: ½ heading + 1 explanation

Revise the chapter

Practise this chapterBoard-style questions from Financial Management, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2026-27: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.