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Arth Nivesh… (Class 12 Business Studies SQP 2025-26, Q17)

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Business StudiesCBSE Class 12 · Sample paper, session 2025-26 · 1 mark · MCQ

CBSE Class 12 Business Studies sample paper 2025-26: question 17

From the official CBSE sample question paper for 2025-26, section A, question 17, for 1 mark. Try it first; the hints and our step-by-step solution are below.

Q17 · 1 mark · MCQCompetency-basedFinancial Management

Arth Nivesh Limited has a high fixed operating cost. The Finance Manager informs the Chief Finance Officer that, in case the company decides to take a loan, for its future financial needs, its fixed financial cost will also increase leading to an overall increase in cost. Identify the factor affecting choice of capital structure discussed above.

  1. (A)Cost of debt
  2. (B)Floatation cost
  3. (C)Risk consideration
  4. (D)Control

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2025-26.

Hints

Open one hint at a time and try again before the next.

Hint 1

What kind of risk do high fixed operating costs create?

Hint 2

What does a loan add to it?

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. The firm already has high fixed operating costs (high business risk). A loan would add fixed interest (financial risk).

  2. When business risk is high, the total risk would rise too much, so the firm should use less debt: the risk consideration. Option (C).

    1 mark

Answer: (C) Risk consideration

Where the marks are

  • Business risk + financial risk (1 mark)

Revise the chapter

Practise this chapterBoard-style questions from Financial Management, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2025-26: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.