What is trading on equity in management accounting?
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Trading on Equity is a financial process that involves taking more debt to boost the return of the shareholders. Trading on Equity occurs when a company takes new debt, in the form of bonds, preferred stock, or loans etc. ... So, the company basically takes advantage of the equity to borrow funds on reasonable terms.
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Trading on equity occurs when a company incurs new debt (such as from bonds, loans, or preferred stock) to acquire assets on which it can earn a return greater than the interest cost of the debt.
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