The concept of 'Cost of Capital' is primarily used to evaluate: MCQ with Answer and Explanation

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The concept of 'Cost of Capital' is primarily used to evaluate:

A. Working capital adequacy

B. Capital Budgeting projects

C. Dividend declarations

D. Inventory turnover

Answer: Option B

Solution (By JKSSB Mock Tests)

Cost of capital serves as the discount rate or hurdle rate for evaluating long-term investment opportunities (capital budgeting).

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

The 'Going Concern' assumption in audit is evaluated by:

A. Management only

B. Tax department

C. Shareholders

D. Auditor to assess whether the entity can continue in operation

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Correct Answer: Option D

Explanation:
Auditor must consider the appropriateness of management's use of going concern basis.

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Question #2

The 'Transfer Pricing' regulations in India are contained in:

A. GST Act

B. Companies Act

C. SEBI Act

D. Sections 92 to 92F of Income Tax Act

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Correct Answer: Option D

Explanation:
Transfer pricing provisions apply to international transactions and specified domestic transactions.

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Question #3

A 'Provision' is recognized when:

A. It is certain

B. Management decides

C. For all future losses

D. There is a present obligation, probable outflow, reliable estimate

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Correct Answer: Option D

Explanation:
As per AS 29, provision is recognized when these three conditions are met.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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