(a) Cost.

(b) Financial strength and stability of operation.

(c) Forms of organisation and legal status.

(d) Purpose and time period.

(e) Risk profile.

(f) Control.

(a) Cost.

(b) Financial strength and stability of operation.

(c) Forms of organisation and legal status.

(d) Purpose and time period.

(e) Risk profile.

(f) Control.

Detailed Answer : 

Factors affecting the choice of the source of funds : 

b Both the cost of procurement of funds and cost of utilising funds should be taken into account while deciding about the source of funds that will be used by an organisation. 

(b) Financial strength and stability of operations : In the choice of source of funds, business should be in a sound financial position so as to be able to repay the borrowed fund and interest amount. 

(c) Form of business organisation : Sole proprietorship and partnership firm can't raise fund by issue of shares or debentures, whereas Joint Stock Companies prefer issue shares and debentures to raise funds. 

(d) Time period : Another factor which helps in deciding the source of funds is the duration for which the firm requires funds as for a short period trade credit, factoring, short-term loans etc. are suitable whereas for long-term shares and debentures are suitable. 

(e) Risk involved : Owners' fund securities (equity, retained earnings) involve no risk where as borrowed fund securities are risky securities. Accordingly the business should choose the source of finance. 

(f) Control : Voting rights of equity shareholders enable them to have control over the business, whereas borrowed capital securities does not dilute the control of management over the business. 

(g) Flexibility : Contractual restrictions by lending organisations / creditors restricts the flexibility of the company. So if other options are available, then firms don't prefer loans from financial institutions and banks which put restrictions. 

(h) Tax benefits : Interest on debentures, loans is deducted from the profits of the company before calculating corporation tax, whereas dividend paid to equity shareholders is not deducted from the total income.