Under which of the following situation. a company is likely to get the benefit of trading on equity?

Return on investment > Cost of debt

With higher use of debt, this difference between RoI and cost of debt increases the EPS. This is a situation of favourable financial leverage. In such cases, companies often employ more of cheaper debt to enhance the EPS. Such practice is called Trading on Equity. Trading on Equity refers to the increase in profit earned by the equity shareholders due to the presence of fixed financial charges like interest.