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.



  • A

    (A) is correct and (R) is the correct explanation of (A) 

  • B

    (A) is correct, but (R) is wrong

  • C

    (R) is correct, but (A) is wrong                                          

  • D

    Both (A) and (R) are wrong