Question

Which of the following is false? Gains of a business may be magnified by finical leverage....

Which of the following is false?

  1. Gains of a business may be magnified by finical leverage.
  2. Gains from investing in stocks may be magnified by margin trading.
  3. both a and b are false
  4. a and b are not false, they are both true
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Answer #2

Solution

Answer-a and b are not false, they are both true

Gains of a business may be magnified by finical leverage- Financial leverage will help the firm to aquire more assets ,thereby it may help in magnyfing the gains of the business.

While doing margin trading ,while investing ,the broker lends money to the investor on the basis of a lesser amount held by the investor originally.Since now the investor can buy or sell higner volume of stocls,he may earn more by investing less thereby magnifying the gains.

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