AfterBoards Logo
Skip to main contentSkip to solution

CUET Business Studies 2025 PYQs22 May Shift 2. Free, no login required.

Business Studies

past year questions, CUET Business Studies 2025 22 May Shift 2

Business Finance

past year questions, Business Studies, CUET Business Studies 2025 22 May Shift 2

Easy

Passage 1: Detrimental debt

On the basis of this passage, answer the questions from Q. No. 41 to Q. No. 45

Even successful businesses have debt, but how much is too much? Learning how to manage debt is what can put you ahead. Taking on the right amount of debt can mean the difference between a business struggling to survive and one that can respond nimbly to changing economic or market conditions. A number of circumstances may justify acquiring debt. As a general rule, borrowing makes the most sense when you need to bolster cash flow or finance growth or expansion. But while debt can provide the leverage you need to grow, too much debt can strangle your business. So the question is: How much debt is too much?

A business that doesn't grow dies. You've got to grow, but you've got to grow within the financial constraints of your business. What is the ideal capital structure a business needs in its industry to remain viable? The higher the volatility (in your industry), the less debt you should have. The smaller the volatility, the more debt you can afford. Consider the capital structure of a growing company, NextGen Ltd.

Total Funds used Rs. 30 Lakh

Interest rate is 10% p.a.

Tax rate 30%

EBIT Rs. 4 Lakh

Nextgen Ltd. has an option to raise different amounts of debt:

Situation I :No Debt

Situation II:Rs. 10 Lakh Debt

Situation III:Rs. 20 Lakh Debt

The EBT of NextGen Ltd with zero debt situation will be

Solution

✅ Correct Option: 1

Option 1 -> Rs.400000 - This represents the earnings before tax when the company operates without any debt financing, eliminating interest expenses from the calculation.

Option 2 -> Rs.500000 - This amount overestimates the EBT as it doesn't account for the actual operating income and expenses of the company in a zero debt scenario.

Option 3 -> Rs.300000 - This figure underestimates the actual earnings before tax that NextGen Ltd would generate without debt obligations.

Option 4 -> Rs.200000 - This is significantly lower than the actual EBT and does not reflect the true earning capacity of the company in a zero debt situation.

Hence, Option 1: Rs.400000 -> In a zero debt situation, the company has no interest expenses to deduct, so the EBT equals the operating income (EBIT). Based on the company's operating performance, the EBT works out to Rs.400000 -> correct

More from this set:

Question 41

"Learning how to manage debt is what can put you ahead". Identify the concept highlighted in the aforesaid statement.

Question 43

Identify the correct statement.

Question 44

What does the term "Capital Structure" imply?

Question 45

What does EBIT stands for:

Keyboard Shortcuts

  • Left arrow: Previous question
  • Right arrow: Next question
  • S key: Jump to solution
  • Q key: Jump to question

CUET Business Studies Past Year Questions (Topic-Wise)