"A judicious mix of both sources - Debt and Equity would increase the EPS" ________ concept of Financial Management is conveyed by the above statement.
"A judicious mix of both sources - Debt and Equity would increase the EPS" ________ concept of Financial Management is conveyed by the above statement.
Show Hint
- Risk consideration
- Return on Investment
- Cost of Equity
- Trading on Equity
The Correct Option is D
Solution and Explanation
A financial strategy known as "Trading on Equity" involves a company using borrowed funds (debt) to boost its returns to equity shareholders. The goal is to enhance Earnings Per Share (EPS) by investing these borrowed funds, provided the investment's return surpasses the cost of the debt. Nevertheless, this approach escalates financial risk. The principle underscores the importance of balancing debt and equity financing to maximize shareholder value.
Top Questions on Financial Planning
A housing property of INR 50 lakh is on sale either through a Full Down Payment (FDP) scheme with an 8% rebate OR a Deferred Payment Plan (DPP) as shown in the table. A customer after converting all the future payments in DPP using 10% annual discount rate, found the DPP scheme to be financially gainful. The customer would be able to save in INR _________ lakh, if DPP is chosen over FDP. (rounded off to two decimal places)
- GATE AR - 2025
- Architecture, Planning and Design
- Financial Planning
Match List - I with List - II
- CUET (UG) - 2025
- Business Studies
- Financial Planning
The decision for opening one more manufacturing unit is related to ___________ .
- CUET (UG) - 2025
- Business Studies
- Financial Planning
"It involves committing the finance on a long-term basis." __________ concept of Financial Management is indicated from the above statement.
- CUET (UG) - 2025
- Business Studies
- Financial Planning
- Want to practice more? Try solving extra ecology questions todayView All Questions