trading on equity
This query is : Resolved
23 November 2007
What is 'Trading on Equity' refers ?
23 November 2007
trading on the equity
Definition
Borrowing funds to increase capital investment with the hope that the business will be able to generate returns in excess of the interest charges.
Definition
Borrowing funds to increase capital investment with the hope that the business will be able to generate returns in excess of the interest charges.
23 November 2007
IN BUSINESS THE FUNDS ARE EITHER OUR OWN LIKE SHARE CAPITAL OR RESERVES OR ACCUMULATED PROFITS OR INTERNAL ACCRUALS.
IF THE FUNDS ARE NOT OUR OWN , THEN IT IS A DEBT, EITHER SHORT TERM OR LONG TERM.
THE RATIO OF OWN FUNDS AND LONG TERM DEBT IS CALLED DEBT EQUITY RATIO.DEBT AND EQUITY TOGETHER MAKE THE CAPITAL STRUCTURE.
IF THE DEBT GENERATES MORE RETURN, THAN ITS COST,THE EXCESS OF THE RETURN GOES TO BENEFIT THE OWNER'S EQUITY,AS IT INCREASES RETURN ON EQUITY.THIS IS TRADING ON EQUITY OR BENEFITTING FROM BETTER RETURN ON DEFT FUNDS AS THIS BETTER RETURN IN TURN HELPS RETURN ON OWN FUNDS.
TRADING ON EQUITY IS ALSO CALLED FINANCIAL LEVERAGE.
PL. VISIT WWW.answers.com,where financial leverage is defined as follows.
Financial Leverage, or the use of borrowed funds, particularly long-term debt, in the capital structure of a firm. Trading profitably on the equity, also known as positive (favorable) financial leverage, means that the borrowed funds generate a higher rate of return than the interest rate paid for the use of the funds. The excess accrues to the benefit of the owners because it magnifies, or increases, their earnings.
R.V.RAO
IF THE FUNDS ARE NOT OUR OWN , THEN IT IS A DEBT, EITHER SHORT TERM OR LONG TERM.
THE RATIO OF OWN FUNDS AND LONG TERM DEBT IS CALLED DEBT EQUITY RATIO.DEBT AND EQUITY TOGETHER MAKE THE CAPITAL STRUCTURE.
IF THE DEBT GENERATES MORE RETURN, THAN ITS COST,THE EXCESS OF THE RETURN GOES TO BENEFIT THE OWNER'S EQUITY,AS IT INCREASES RETURN ON EQUITY.THIS IS TRADING ON EQUITY OR BENEFITTING FROM BETTER RETURN ON DEFT FUNDS AS THIS BETTER RETURN IN TURN HELPS RETURN ON OWN FUNDS.
TRADING ON EQUITY IS ALSO CALLED FINANCIAL LEVERAGE.
PL. VISIT WWW.answers.com,where financial leverage is defined as follows.
Financial Leverage, or the use of borrowed funds, particularly long-term debt, in the capital structure of a firm. Trading profitably on the equity, also known as positive (favorable) financial leverage, means that the borrowed funds generate a higher rate of return than the interest rate paid for the use of the funds. The excess accrues to the benefit of the owners because it magnifies, or increases, their earnings.
R.V.RAO
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Opting our of sec 44AD
- GST Treatment of Insurance Commission for Existing GST Holder
- Form 121 & TDS deduction
- Inter corporate deposits
- SALE OF MOTOR CAR BY REGISTERED INDIVIDUAL
- LC charges in relation to Asset purchased should be Capitalised ?
- Multiple trade mark
- Transporter Declaration form
- Regarding appeal to GSTAT
- Invoice V/S Goods receipt Note Date
- Tax amount diff in Gstr1 and 3B in tax compare reports
- Tds on GST in connection with sale to public company
- Restoration of certificate of practice
- Regarding change in correspondence address in SSP portal
- No Compliences after incorporation
- USEFUL LIFE OF USED/SECOND HAND COMMERCIAL VEHICLES
- Claiming TDS deducted by builder on Hardship compensation and Corpus
- Address Change to another state of a Registered Trust with 12AB approval
- Updated return in budget 2026
- Clarification Required on GST Rate & HSN Classification – Millet-Based Probiotic Drink
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
