CUET Business Studies 2022 16 July Shift 2 PYQs

What is the consequence of increasing debt in a company's capital structure?

The CFO of a company wants to change the capital structure of the company. Identify the factors which affect the choice of capital structure.

(A) Stock Market Condition

(B) Tax Rate

(C) Cost of Equity

(D) Level of Competition

Choose the correct answer from the options given below:

Financial leverage is believed to be favorable if:

1. ROI is lower than cost of debt
2. ROI is higher than cost of debt
3. Debt is not easily available
4. If the interest rate is high