Trading on equity
This query is : Resolved
22 May 2014
what is mean by trading on equity? ????
22 May 2014
Trading on equity is sometimes referred to as financial leverage or the leverage factor.
Trading on equity occurs when a corporation uses bonds, other debt, and preferred stock to increase its earnings on common stock. For example, a corporation might use long term debt to purchase assets that are expected to earn more than the interest on the debt. The earnings in excess of the interest expense on the new debt will increase the earnings of the corporation's common stockholders. The increase in earnings indicates that the corporation was successful in trading on equity.
If the newly purchased assets earn less than the interest expense on the new debt, the earnings of the common stockholders will decrease.
Trading on equity occurs when a corporation uses bonds, other debt, and preferred stock to increase its earnings on common stock. For example, a corporation might use long term debt to purchase assets that are expected to earn more than the interest on the debt. The earnings in excess of the interest expense on the new debt will increase the earnings of the corporation's common stockholders. The increase in earnings indicates that the corporation was successful in trading on equity.
If the newly purchased assets earn less than the interest expense on the new debt, the earnings of the common stockholders will decrease.
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
- REGARDING GST ON COMMERICIAL PROPERTY
- Is this income indian or foreign income?
- 15ca /15cb whose income tax login? remitter or nri seller's login?
- RCM applicability on Rent Paid by Registered Person to Unregistered Landlord for Residental Building
- ITC temporary reversal and reclaim
- Regarding Documentation & Compliances for Opening of Unit of Pvt Ltd.
- GST on export of services and Input Credit
- TDS U/S. 194NF
- Applicable TDS rate for sale of property in Nov 2024
- RCM INVOICING FROM NOV-2024
- IGST Credit-Show cause notice issued-confusion
- Issue of gst e invoice
- How to adjusted advances given or receipt
- Foreign vendor without PAN unable to to register due to non receipt of OTP on foreign number ?
- 133(6) DIN INVALID format error - ->WHERE TO REPLY 133(6) notice?
- Query for dubts
- Regarding einvoice taken on nil rated sales
- Strategical investment in Public listed company
- CASE INTIMATION OF LIABILITY UNDER SECTION 73(5)(Rule 142(1A)
- Need to correct "Whether it is last installment " response in Form 26 QB
Trending Online Classes
CAclubindia
