Business Studies

Business Finance

Medium

Under which of the following situation, a company is likely to get the benefit of trading on equity?

Only equity in capital structure

Return on investment > Cost of debt

Return on investment < Cost of debt

Only debt in capital structure

✅ Correct Option: 2

Trading on equity occurs when a company uses debt to increase earnings per share available to equity shareholders. It is beneficial only when the Return on Investment (ROI) is greater than the Cost of Debt, as the extra return after paying interest on debt accrues to equity shareholders. Hence, the correct answer is option 2.

2025: 3 June Shift 2

Which of the following is not a factor affecting the working capital requirements of a business firm?

2022: 17 Aug Shift 1

From the following source of finance, identify the source that is not related to Owner's fund:

2025: 14 May Shift 1

Working Capital management doesn't include:

2026: 24 May Shift 1

Increased use of debt, is likely to ________ of the firm provided that the cost of equity remains unaffected.

2026: 13 May Shift 2

"Even business owners who receive detailed financial statements from their accountants ……………". Complete the statement as per passage.

2025: 26 May Shift 2

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Under which of the following situation, a company is likely to get the benefit of trading on equity?

Solution

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