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The question part b asks about factors determining long term finance policy , and factors causing policy to change
I thought of factors affecting long term financing decision as
Cost, risk, cashflow position of company, control, state of capital marketsPlease highlight the factors for this correctly and also the factors causing change of policy with simple explanations
The long term policy is really a question of what their intention is as regards whether to raise equity, raise debt, or a mixture of the two. So for this part the main thing to mention is M&M (the examiners answer doesn’t mention them specifically, but does refer to the tax advantage of debt) and it would be sensible to mention pecking order theory as well.
The factors that could cause a change in policy are indeed the amount of cash needed for investment and the state of the capital markets (and indirectly the state of the economy).
The only one of your points that I do not think is likely to be significant is control because this is a listed company.
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