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    Question

    As part of debt analysis, a company’s Total Debt

    Service Cost is considered to include which of the following components?
    A Only principal repayment obligations Correct Answer Incorrect Answer
    B Only interest payments on outstanding debt Correct Answer Incorrect Answer
    C Sinking fund contributions made towards debt retirement Correct Answer Incorrect Answer
    D Both (a) and (b) Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    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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