Question

Statement I: Cost of debt is lower than cost of equity for a company.

Statement II: The objective of financial management is to increase shareholder’s wealth.

In the light of given statements, choose the correct alternative from the following:

पर्याय

• Both the statements are true.

• Both the statements are false.

• Statement I is true, Statement II is false.

• Statement II is true, Statement I is false.

Answer 1

Both the statements are true.

Explanation:

• Statement I is true because the cost of debt is generally lower than the cost of equity due to tax benefits on interest payments.
• Statement II is true because the primary objective of financial management is to maximize shareholder wealth by increasing the value of their investment.