General Studies · Capital Structure
Assertion (A): Trading on equity raises the return on equity to the shareholders of a company. Reason (R): The cost of debt is lower than the cost of equity and interest paid on debt is tax deductible.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1(A) is true, but (R) is false
- 2(A) is false, but (R) is true
- 3Both (A) and (R) are true, but (R) is not the correct explanation of (A)
- 4Both (A) and (R) are true, and (R) is the correct explanation of (A)✓
Correct answer
Both (A) and (R) are true, and (R) is the correct explanation of (A)
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