What are the principles of trading on equity?
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Trading on equity happens when a company incurs new debt using bonds, loans, bonds or preferred stock. The company then uses these funds to gain assets which will create returns which are larger than the interest of the new debt. Alternatively, trading on equity called financial leverage
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Trading on equity is a technique to earn profits. In equity capital, the amount of both equity shares and free reserves and Debt capital are included. The proportion of debt capital is higher in it, as compared to owners capital. Operation of own regular trade is done in it by taking the capital, along with owners capital.
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