Question

Thoroughly explain indicate a proper understanding of the concept. Each correct answer is worth TWO marks.

1. Net Worth

2. Burden of the Debt

3. Tax Rate Structure.

4. Comprehensive Income:

5. Selective Tax:

6. User Charges:

7. Taxable Income:

8. Lump-Sum Tax:

9. Capital Gains:

10.Public Finance

Answer 1

1. Net Worth is the total assets of the company or a person minus liabilities. In the case of companies it is the sum of fixed liabilities and long term liabilities.

Net worth or shareholder's fund = Share capital + Reserves + Surplus (ie, profits) + Long term debt - Fictitious assets. Examples for fictitious assets are preliminary expenses, discount on issue of shares etc

2. Burden of the Debt is the cost of servicing the debt. It is nothing but the interest payments of the debt. Companies opting debt capital has to pay the interest irrespective of the profitability.

3. Tax Rate Structure : The structure of rates of taxes on income of the person can be of two types, Regressive and Progressive. In regressive tax rate structure, individuals with low income pays higher percentage of the income on taxes than the high income individuals. On the other hand, in progressive tax rate structure, the persons who make more money pays more taxes and those who makes less money pays taxes on lower rates.

4. Comprehensive Income : International Financial Reporting Standards use the term Other Comprehensive Income (OCI) It is the change in owner's equity excluding transactions that are not from the part of owner and which do not appear in the income statement. The sum of Net Income and Other Comprehensive Income is called as Comprehensive Income.