The 'Cost of Debt' is computed as: MCQ with Answer and Explanation

Question
The 'Cost of Debt' is computed as:
A. Dividend / Market price
B. Interest rate
C. EBIT / Total capital
D. Interest rate * (1 - tax rate)
Answer: Option D
Solution (By JKSSB Mock Tests)
Cost of debt is after tax because interest is tax deductible.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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Practice More Accountancy and Book Keeping Questions

Question #1
A company uses 'Economic Order Quantity' (EOQ) of 500 units. Annual demand is 5,000 units. Number of orders per year will be:
A. 5
B. 10
C. 100
D. 500
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Correct Answer: Option B

Explanation:
Number of orders = Annual demand / EOQ = 5,000 / 500 = 10.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #2
The 'Significant Economic Presence' (SEP) concept was introduced in India to:
A. Tax non-resident digital companies based on economic engagement
B. Reduce tax on foreigners
C. Encourage FDI
D. Simplify tax
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Correct Answer: Option A

Explanation:
SEP deems a business connection if a non-resident has significant economic presence, even without physical presence.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #3
Under single entry system, profit = closing capital - opening capital + drawings - additional capital introduced. This statement is:
A. Only for companies
B. Partially correct, needs other adjustments
C. Correct
D. Incorrect
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Correct Answer: Option C

Explanation:
In single entry, adjusted profit is derived from capital comparison: Profit = Closing capital + Drawings - Opening capital - Additional capital.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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