C. Both A and B depending on the presence of preference shares
D. EBIT / (EBIT - Interest)
Answer: Option C
Solution (By JKSSB Mock Tests)
DFL measures the sensitivity of EPS to changes in EBIT. If only debt is present, DFL = EBIT / (EBIT - I). If preference shares are also present, the formula includes the pre-tax equivalent of preference dividends, making D option correct.
Explanation:
Salary to partners is allowed only if partnership deed provides. Interest on capital is not automatic. Profits sharing can be unequal. Minor cannot be a partner, only admitted to benefits.
Explanation:
The Current Ratio measures short-term liquidity, not long-term solvency. The Debt-Equity Ratio measures long-term solvency, not short-term liquidity. Both statements have swapped the definitions. Both are incorrect.
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