When the firm takes advantage of borrowed funds to increase the ROI, it is
termed as
a) Trading on Equity
b) Over Capitalisation
c) Over Trading
d) Capital Gearing.
Answers
a is the answer okkkkkkkkk
The form takes advantage of borrowed funds to increase its ROI is termed as Capital gearing.
Explanation:
a) Trade on equity is referred to the process in which share holders benefit or gain from the debt. So the debt s used for producing gains to the company share holders company trades on thick equity.
b) Over capitalization is the process when the firm makes use of more amount of capital (equity or debt) that exceed its assets value.
c) Over trading refers to the process of purchasing or selling stocks that exceeds its limits.
d) capital gearing refers to the financial leverage or the debt owned by the company. Now if the company takes the advantage of borrowed funds to increase its ROI is generally termed as the leverage factor. ROI here refers to the Returns on Investment. So the process is a type of capital gearing.
So the correct answer is Option d) Capital Gearing.