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प्रश्न
Explain the following as factors affecting the choice of capital structure:
Return on Investment
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उत्तर
Factors affecting the choice of capital structure:
Return on Investment: Debt offers the higher return in the sense that in case of debt, the difference between cost and return is greater. Accordingly, the earning per share is greater.
Higher ROI ⇒ More debt
Lower ROI ⇒ Lower debt
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संबंधित प्रश्न
Viyo Ltd.' is a company manufacturing textiles. It has a share capital of Rs 60 lakhs. The earnings per share in the previous year was Rs 0.50. For diversification, the company requires additional capital of Rs 40 lakhs. The company raised funds by issuing 10% debentures for the same. During the current year the company earned profit of Rs 8 lakhs on capital employed. It paid tax @ 40%.
a. State whether the shareholders gained or lost, in respect of earning per share on diversification. Show you calculations clearly.
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