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प्रश्न
If the rate of earnings on investment for a company is 16%, a situation of unfavourable financial leverage will be said to arise when the rate of interest payable on debt capital is ______.
पर्याय
More than 16%
Less than 16%
Equal to 16%
None of the above
MCQ
रिकाम्या जागा भरा
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उत्तर
If the rate of earnings on investment for a company is 16%, a situation of unfavourable financial leverage will be said to arise when the rate of interest payable on debt capital is more than 16%.
Explanation:
- When a company earns 16% on its investments but pays more than 16% on debt, the cost of debt is higher than the return.
- This results in a loss for shareholders, which is an unfavourable financial leverage situation.
If the interest rate is less than 16%, the company benefits, and the leverage is favourable.
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