Business Studies

Business Finance

Easy

The impact of tax rate on cost of debt is:

A higher tax rate makes debt relatively cheaper

A higher tax rate makes debt relatively more costlier

A higher or lower tax rate doesn't have any impact on debt

A lower tax rate makes debt relatively cheaper

✅ Correct Option: 1

Interest on debt is a tax-deductible expense, so the effective cost of debt is $I(1-t)$ , where $t$ is the tax rate. A higher tax rate increases the tax shield on interest, lowering the after-tax cost of debt and making debt relatively cheaper compared to equity.

2023: 29 May Shift 2

Match List I with List II

LIST I		LIST II
A. Treasury Bill	I.	Mobilise large amount of money
B. Commercial paper	II.	Maturity period of one day to fifteen days
C. Call money	III.	Maturity period of 15 days to one year
D. Certificate of Deposit	IV.	Issued by RBI

Choose the correct answer from the options given below:

2025: 22 May Shift 2

Current assets are usually more liquid but contribute less to the profits than fixed assets. Examples of current assets are:

(A) Cash in hand/Cash at the Bank

(B) Marketable securities

(D) Finished goods inventory

Choose the correct answer from the options given below:

2025: 21 May Shift 1

The mix between debt and owners fund is known as:

2025: 3 June Shift 2

Identify the correct sequence of the process of financial planning from the options given below:

(A) The preparation of a sales forecast.

(B) Estimates showing expected profits are made to know how much fund requirements can be met internally.

(D) Estimation of the requirement for external funds.

Choose the correct answer from the options given below:

2025: 31 May Shift 1

Which of the following is not a factor affecting the important decision being discussed in the passage above?

2026: 29 May Shift 2

The Capital Budgeting Decisions are not affected by:

The impact of tax rate on cost of debt is:

Solution

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