General Studies · Financial Management
Given below are two statements: One is labelled as Assertion (A) and the other is labelled as Reason (R): Assertion (A): Capital structure is determined within the debt capacity of a company and it should not be exceeded. Reason (R): Debt capacity of a company depends on its ability to generate cash flows. It should generate cash enough to pay lenders' fixed charges and principal sums. In the light of the above statements, choose the most appropriate answer:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1(A) is not correct but (R) is correct
- 2(A) is correct but (R) is not correct
- 3Both (A) and (R) are correct but (R) is NOT the correct explanation of (A)
- 4Both (A) and (R) are correct and (R) is the correct explanation of (A)✓
Correct answer
Both (A) and (R) are correct and (R) is the correct explanation of (A)
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