Question
As part of debt analysis, a company’s Total Debt
Service Cost is considered to include which of the following components?Solution
The term Total Debt Service Cost captures the full financial burden of servicing debt. It is not limited to interest alone but includes every fixed obligation linked to outstanding borrowings. Specifically: 1. Principal Repayments – Scheduled installments of the original loan amount. 2. Interest Payments – Periodic charges for borrowing capital. 3. Sinking Fund Obligations – Any mandatory reserves set aside to repay or retire debt in the future. Hence, the correct interpretation is that all three components together form the Total Debt Service Cost.
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