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Question : 14
Total: 39
_______ refers to the increase in profit earned by the equity shareholders due to the presence of fixed financial charges like interest.
Solution:
(c) Trading on equity
Trading on equity is the financial strategy in which a company uses borrowed funds to generate income that exceeds the cost of borrowing with the aim of increasing the return on equity shareholders. The practice is known as trading on equity because it is the equity shareholders who have only interest (or equity) in the business income.
Trading on equity is the financial strategy in which a company uses borrowed funds to generate income that exceeds the cost of borrowing with the aim of increasing the return on equity shareholders. The practice is known as trading on equity because it is the equity shareholders who have only interest (or equity) in the business income.
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