Question

Name the concept where using the debt along equity, higher return can be earn for equity shareholders. Under what condition it is possible?

Answer 1

Trading on equity refers to an increase in earnings per share , I.e , dividend earned by the shareholders which is done b borrowing money(debt) at a lower cost. It can be done only when money can be borrowed cheaply,I.e ,when rate of interest on debt is lower than return on investment .