Which of the Following Is Not a Primary Motivation for a Company

question 55

Multiple Choice

Which of the following is not a primary motivation for a company financing its business activities through debt?

• A)Trading on the equity
• B)Reducing earnings variability
• C)Tax deductibility of interest
• D)Avoiding earnings dilution

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Definitions:

WACC

Weighted Average Cost of Capital, representing the average rate of return a company is expected to pay its security holders.

Return on Investment

Return on Investment (ROI) measures the gain or loss generated by an investment relative to the amount of money invested.

Minimised

Reduced to the smallest possible size, amount, degree, or level.

Larger Scheme

A broader or more comprehensive plan or ambition that smaller actions or ideas contribute towards.