Multiple choice

Trading on equity means

  1. trading on arrears funds

  2. trading on borrowed funds

  3. trading on family funds

  4. trading on friends funds

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Trading on equity refers to the practice of using borrowed funds (debt) to increase the return on equity shareholders' funds. When the return on investment is higher than the cost of debt, it magnifies returns for equity shareholders. It's not about trading on arrears, family funds, or friends' funds.