Q.
1
Assertion(A): The primary motive of a company in using financial leverage is to magnify shareholder’s return under favourable economic conditions
Reason (R): To magnify shareholder’s return fixed charge funds can be obtained at a cost higher than the firm’s rate of return on net assets.
Codes:
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A
(A) is correct and (R) is the correct explanation of (A)
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B
(A) is correct, but (R) is wrong
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C
(R) is correct, but (A) is wrong
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D
Both (A) and (R) are wrong