Question

Dividend paid to the Equity shareholders does not reduce the profits of company. It is not a deductible expense like interest paid to debenture holders. It is not treated as expense rather it is treated as part of divisible profit”. The above fact related to equity shares is one of its limitations. Identify this limitation.
1 point
a) No flexibility in capital structure
b) More floatation costs
c) No tax advantage
d) No advantage of trading on equity​

Answer 1

Answer:

In the diagram, income is measured horizontally and consumption is measured vertically. ... “Thus the consumption function measures not only the amount spent on consumption but also the amount saved. This is because the propensity to save is merely the propensity not to consume.