Building rent, Insurance premium, salaries etc. are examples of which cost?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- operating cost.
Building rent, Insurance premium, salaries etc. are examples of operating cost.
If a business has high fixed operating costs (e.g., building rent, Insurance premium, Salaries, etc.), It must reduce fixed financing costs. Hence, lower debt financing is better. Similarly, if fixed operating cost is less, more of debt financing may be preferred.