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Home Questions GHMPYW74ST
Target Exam

CUET

Subject

Business Studies

Chapter

Financial Management

Question:

Match the following:

1. Fixed operating cost A. The deficiency referred to in the interest coverage ratio
2. Interest coverage ratio B. Building rent, insurance premium, salaries etc
3. Debt service coverage ratio C. Long-term investment decision
4. Capital budgeting decision D. Number of times earnings before interest and taxes of a company covers the interest obligation
Options:

1-A, 2-D, 3-B, 4-C

1-C, 2-D, 3-A, 4-B

1-D, 2-B, 3-A, 4-C

1-B, 2-D, 3-A, 4-C

Correct Answer:

1-B, 2-D, 3-A, 4-C

Explanation:

Fixed operating cost: Following are the examples of fixed operating costs(e.g., building rent, Insurance premium, Salaries, etc.)

Interest coverage ratio: The interest coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation.

Debt service coverage ratio: : Debt Service Coverage Ratio takes care of the deficiencies referred to in the Interest Coverage Ratio (ICR).  capital.

Capital budgeting decision: A long-term investment decision is also called a Capital Budgeting decision. It involves committing the finance on a long term basis. For example, making investment in a new machine to replace an existing one or acquiring a new fixed asset or opening a new branch, etc.

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