Company A is financed by £60000 equity and £20000 borrowing. Company B is financed by £40000 equity and £40000 borrowing and Company C is financed by £20000 equity and £60000 borrowing. All equity consists of £1 ordinary shares. Assuming profits before interest are the same in all three companies at £8000 and interest rates are 10% which shareholders will be best off?
A) A
B) B
C) C
D) All are as well off as the others
Correct Answer:
Verified
Q6: Debentures are a form of equity capital.
Q7: An ordinary share and a preference share
Q8: The total assets are always equal to
Q9: Bank overdrafts are the cheapest way of
Q10: Company A is financed by £60000 equity
Q11: The charges relating to operating leases are
Q12: Leasing is a classic example of short
Q13: Business that are financed solely by equity
Q15: A highly geared business is more susceptible
Q16: Bank overdrafts are long term liabilities of
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents