Page 5 - Lesson Note 4
P. 5
Depending upon the market condition the investors may be more careful in
their dealings.
During depression period in the market business is slow and investors also
hesitate to take risk so at this time it is advisable to issue borrowed fund
securities as these are less risky and ensure fixed repayment and regular
payment of interest but if there is Boom period, business is flourishing and
investors also take risk and prefer to invest in equity shares to earn more in
the form of dividend.
14. Capital structure of other companies.
Some companies frame their capital structure according to industrial
norms. But proper care must be taken as blindly following industrial norms
may lead to financial risk. If firm cannot afford high risk it should not raise
more debt only because other firms are rising.
