#### Question

Explain the following as factors affecting the choice of capital structure:

Return on Investment

#### Solution

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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Solution Explain the Following as Factors Affecting the Choice of Capital Structure: Return on Investment Concept: Concept of Capital Structure.