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ABC Ltd. has Debt Equity ratio of 3:1 wh...

ABC Ltd. has Debt Equity ratio of 3:1 whereas Ltd. has Debt Equity ratio of 1:1. Name the advantage ABC Ltd will have over Ltd, when the rate of interest is lower than the rate of return on investment of the company.
(a) Trading on equity, (b) Low risk, (c) Low cost of equity , (d) Greater flexibility.

Text Solution

Verified by Experts

The correct Answer is:
a
Trading on equity.
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