Question

The use of borrowings for the purpose of financial advantage for residual stockholders is also called ____________.

• A. Trading on equity
• B. Debt Equity Ratio
• C. Both (a) or (b)
• D. None of the above

Answer 1

The correct option is A Trading on equity

Trading on equity, which is also referred to as financial leverage occurs when a corporation uses bonds, other debt, and preferred stock to increase its earnings on its common stock.

Hence, option (A) is the correct answer.