Assertion (A): The primary motive of a company in using financial leverage is to magnity shareholder's return under favourable economic conditions.
Reason (R): To magnify shareholder's return fixed charges, funds can be obtained at a cost higher than the firm's rate of return on net assets.

A) (A) is correct, and (R) is the correct explanation of (A) B) (A) is correct, but (R) is incorrect C) (R) is correct, but (A) is incorrect D) Both (A) and (R) are incorrect

Answer & Solution

Correct Answer: Option B

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b. Net operating income approach	2. Working capital management
c. Short-term money market instrument	3. Capital structure
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Assertion (A) The primary motive of a company in using financial...

Assertion (A): The primary motive of a company in using financial leverage is to magnity shareholder's return under favourable economic conditions. Reason (R): To magnify shareholder's return fixed charges, funds can be obtained at a cost higher than the firm's rate of return on net assets.

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Related Questions on Business Finance

Assertion (A): The primary motive of a company in using financial leverage is to magnity shareholder's return under favourable economic conditions.
Reason (R): To magnify shareholder's return fixed charges, funds can be obtained at a cost higher than the firm's rate of return on net assets.