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Consider the below mentioned statements and state the correct code.
Statement (I): A debt-equity ratio of 2: 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.
Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt.
Statement (I): A debt-equity ratio of 2: 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.
Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt.
- a)Both the Statements (I) and (II) are false.
- b)Both the Statements (I) and (II) are true.
- c)Statement (I) is false, and Statement (II) is true.
- d)Statement (I) is true, and Statement (II) is false.
Correct answer is option 'D'. Can you explain this answer?
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Consider the below mentioned statements and state the correct code.Sta...
Explanation of Statement (I)
- Statement (I) claims that a debt-equity ratio of 2:1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.
- This statement is true. A debt-equity ratio of 2:1 means that for every 1 unit of equity, there are 2 units of debt. Thus, it accurately describes the relationship between debt and equity.
Explanation of Statement (II)
- Statement (II) asserts that the cost of floating an equity issue is lesser than the cost of floating a debt.
- This statement is false. Generally, the cost of issuing debt (like bonds or loans) tends to be lower than that of issuing equity. Equity financing often involves higher costs due to underwriting fees, legal expenses, and potential dilution of ownership.
Conclusion
- Based on the evaluations:
- Statement (I) is true.
- Statement (II) is false.
Thus, the correct answer is option 'D': Statement (I) is true, and Statement (II) is false. This distinction is crucial for understanding corporate finance and capital structure.
- Statement (I) claims that a debt-equity ratio of 2:1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.
- This statement is true. A debt-equity ratio of 2:1 means that for every 1 unit of equity, there are 2 units of debt. Thus, it accurately describes the relationship between debt and equity.
Explanation of Statement (II)
- Statement (II) asserts that the cost of floating an equity issue is lesser than the cost of floating a debt.
- This statement is false. Generally, the cost of issuing debt (like bonds or loans) tends to be lower than that of issuing equity. Equity financing often involves higher costs due to underwriting fees, legal expenses, and potential dilution of ownership.
Conclusion
- Based on the evaluations:
- Statement (I) is true.
- Statement (II) is false.
Thus, the correct answer is option 'D': Statement (I) is true, and Statement (II) is false. This distinction is crucial for understanding corporate finance and capital structure.
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Consider the below mentioned statements and state the correct code.Sta...
The debt-to-equity ratio is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. A D/E ratio of 2 indicates that the company derives two-thirds of its capital financing from debt and one-third from shareholder equity, so it borrows twice as much funding as it owns (2 debt units for every 1 equity unit).
Flotation cost is the total cost incurred by a company in offering its securities to the public. They arise from expenses such as underwriting fees, legal fees and registration fees. Flotation costs make new equity cost more than cost of floating a debt.
Flotation cost is the total cost incurred by a company in offering its securities to the public. They arise from expenses such as underwriting fees, legal fees and registration fees. Flotation costs make new equity cost more than cost of floating a debt.
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Consider the below mentioned statements and state the correct code.Statement (I): A debt-equity ratio of 2: 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt.a)Both the Statements (I) and (II) are false.b)Both the Statements (I) and (II) are true.c)Statement (I) is false, and Statement (II) is true.d)Statement (I) is true, and Statement (II) is false.Correct answer is option 'D'. Can you explain this answer?
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Consider the below mentioned statements and state the correct code.Statement (I): A debt-equity ratio of 2: 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt.a)Both the Statements (I) and (II) are false.b)Both the Statements (I) and (II) are true.c)Statement (I) is false, and Statement (II) is true.d)Statement (I) is true, and Statement (II) is false.Correct answer is option 'D'. Can you explain this answer? for UGC NET 2024 is part of UGC NET preparation. The Question and answers have been prepared according to the UGC NET exam syllabus. Information about Consider the below mentioned statements and state the correct code.Statement (I): A debt-equity ratio of 2: 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt.a)Both the Statements (I) and (II) are false.b)Both the Statements (I) and (II) are true.c)Statement (I) is false, and Statement (II) is true.d)Statement (I) is true, and Statement (II) is false.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for UGC NET 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the below mentioned statements and state the correct code.Statement (I): A debt-equity ratio of 2: 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt.a)Both the Statements (I) and (II) are false.b)Both the Statements (I) and (II) are true.c)Statement (I) is false, and Statement (II) is true.d)Statement (I) is true, and Statement (II) is false.Correct answer is option 'D'. Can you explain this answer?.
Consider the below mentioned statements and state the correct code.Statement (I): A debt-equity ratio of 2: 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt.a)Both the Statements (I) and (II) are false.b)Both the Statements (I) and (II) are true.c)Statement (I) is false, and Statement (II) is true.d)Statement (I) is true, and Statement (II) is false.Correct answer is option 'D'. Can you explain this answer? for UGC NET 2024 is part of UGC NET preparation. The Question and answers have been prepared according to the UGC NET exam syllabus. Information about Consider the below mentioned statements and state the correct code.Statement (I): A debt-equity ratio of 2: 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt.a)Both the Statements (I) and (II) are false.b)Both the Statements (I) and (II) are true.c)Statement (I) is false, and Statement (II) is true.d)Statement (I) is true, and Statement (II) is false.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for UGC NET 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the below mentioned statements and state the correct code.Statement (I): A debt-equity ratio of 2: 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt.a)Both the Statements (I) and (II) are false.b)Both the Statements (I) and (II) are true.c)Statement (I) is false, and Statement (II) is true.d)Statement (I) is true, and Statement (II) is false.Correct answer is option 'D'. Can you explain this answer?.
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ample number of questions to practice Consider the below mentioned statements and state the correct code.Statement (I): A debt-equity ratio of 2: 1 indicates that for every 1 unit of equity, the company has raised 2 units of debt.Statement (II): The cost of floating an equity issue is lesser than the cost of floating a debt.a)Both the Statements (I) and (II) are false.b)Both the Statements (I) and (II) are true.c)Statement (I) is false, and Statement (II) is true.d)Statement (I) is true, and Statement (II) is false.Correct answer is option 'D'. Can you explain this answer? tests, examples and also practice UGC NET tests.
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