Bulls vs Bears

Dear Students

I your chapter -10 (Financial Market ) you come across terms Bullish and Bearish
Watch the video below to understand what exactly these terms means and how it impact the buying  behavior of investors

Image credit : http://www.sketchplanations.com

So when bulls attack they swipe up, 

and 

when bears attack they swipe down

Examination Questions : 

1. Explain state of Capital Markets as a factor affecting financing decision ? 

Answer  : 

 Health of the capital market may also affect the choice of source of fund.

 During the period when stock market is rising(bullish), more people are ready to invest in equity because of increasing prices . So at that time it is better to offer Equity

During depressed capital market(Bearish)  issue of equity shares is difficult for any company as investors are not in mood to buy equity because of decreasing prices . So at that time it is better to offer Debt.

2.  Explain "Stock Market Conditions"  as a factor affecting Capital structure of comapny ? :

Answer  :

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.