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If website.com links to website.com/utilities

Does website.com/utilities/business.html  pagerank get benefited from this?

The reason I ask is, I have the option to have:

1) website.com/utilities/business.html

or

2) website.com/utilities-business

My boss says would like to keep the first example and link directory to subdirectory --> File.

I prefer the second example because the potential traffic in it is a source of revenue and I want it to get linkpower from homepage directly.

So, unless linkjuice is transfered horizontally across subdirectories, 2) would be better SEO-wise, is this correct?

Thanks a lot.