Business Studies

Business Finance

Medium

The factors affecting choice of capital structure are:

Cash flow position

Tax Rate

Nature of Business

Cost of debt

Choose the correct answer from the options given below:

(A), (B) and (D) only

(A), (B) and (C) only

(A), (B), (C) and (D)

(B), (C) and (D) only

✅ Correct Option: 1

Cash flow position affects the ability of a firm to meet fixed financial commitments.

Higher and stable cash flows allow the firm to take more debt.

Tax rate influences capital structure due to the tax advantage on interest.

Interest on debt is tax-deductible, so a higher tax rate makes debt more attractive.

Cost of debt determines whether borrowing is economical.

If the cost of debt is low, firms prefer debt; if high, they avoid it.

Nature of business is not explicitly listed in NCERT factors.

Thus, as per NCERT:

(A), (B) and (D) only

Correct answer: Option 1

2025: 26 May Shift 2

What is the full form of EBIT?

2026: 21 May Shift 2

The factors affecting the Working Capital Requirements are:

A. Credit allowed

B. Financing alternatives

C. Cost of equity

D. Operating efficiency

Choose the correct answer from the options given below:

2025: 14 May Shift 2

Financial leverage is associated with which of the following?

(A) $\frac{\text{Debt}}{\text{Debt + Capital}}$

(B) $\frac{\text{Debt}}{\text{Equity}}$

(D) $\frac{\text{Debt}}{\text{Debt + Equity}}$

Choose the correct answer from the options given below:

2025: 13 May Shift 2

Match List-I with List-II

List-I	List-II
Decisions	Factors affecting the Decisions
---	---
(A) Fixed Capital Decision.	(I) Diversification
(B) Capital Structure Decision	(II) Cash flows of the project
(C) Working Capital Decision	(III) Control on Business
(D) Capital budgeting decision	(IV) Business Cycle

Choose the correct answer from the options given below:

2022: 20 Aug Shift 1

"A company has the policy of giving liberal credit to its customers in order to increase the sales."

Identify the factor affecting working capital requirement in the above situation.

2026: 29 May Shift 2

The Capital Budgeting Decisions are not affected by:

Solution