Economics · Financial Leverage
Assertion (A): The primary motive of a company in using financial leverage is to magnify shareholders' returns under favorable economic conditions. Reason (R): To magnify shareholders' return, fixed-charge funds must be obtained at a cost higher than the firm's rate of return on net assets.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both (A) and (R) are wrong
- 2Both (A) and (R) are correct and (R) is the correct explanation of (A)
- 3(A) is correct but (R) is wrong✓
- 4(R) is correct but (A) is wrong
Correct answer
(A) is correct but (R) is wrong
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