1. Cash flow position: If the cash flow position of the company is good, the payment of interest on the debt and the refund of capital can be easily made. Therefore, in order to take advantage of cheap finance, debt can be given priority.

2. Level of fixed operating costs: In business, there are mainly two types of costs:

i. Fixed operating costs, e.g., rent of the building, payment of salary, insurance premium, etc.

ii. Fixed financial costs, e.g., interest on debt, etc. If the level of fixed operating costs is in excess, it is better to keep the fixed financial costs at their minimum. Therefore, debt capital should not be used. On the contrary, if the level of fixed operating cost is low, the use of debt capital is profitable.

3. Control consideration: The ultimate control of the company is that of the equity shareholders. Greater the number of equity shareholder, the greater will be the control in the hands of more people. This is not a good situation. Therefore, from this point of view the equity share capital should be avoided.

4. State of capital market: Bullish time brings more profit. Therefore, the people like to invest more in equity shares. On the contrary, the profits are low when there is a bear market. The people give preference to debt capital in order to earn more profits. Therefore, the source of finance should be chosen keeping in view the position of the market.