Trading on equity is favourable for companies which have large investments in ____________ .

Fixed assets

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Variable assets

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Liquid assets

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None of the above

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Solution

The correct option is C Fixed assets
Trading on equity means taking advantages of ownership. Here ownership means equity (capital) and trading means taking advantage of a company is mainly interested in two aspects of its capital, viz:
(1) The funds invested by (equity) shareholders, i.e., equity share capital, and
(2) Free reserve (set aside mainly for reinvestment purposes).

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