Textile mills borrows money at a rate of 13.5 percent. This interest rate is referred to as the?

The interest rate that the textile mills take is known as the cost of debt. For a textile mill to carry on its business it needs to borrow money from other banks and financial institutions. This loan taken for the purpose of the business will have to be repaid. This loan is otherwise called debt. The cost that the business pays to get the debt is called the cost of debt in this case the interest.

Whenever the business borrows money it will have to repay more than the debt it had taken. This extra that they have to pay back is called the cost of taking that debt. This is the only factor that varies while taking the debt as the amount usually remains the same. So the business concern has to do a study from where the cost of debt will be the least and then choose that option.

The cost of debt can be a type of cost that they have to calculate before calculating the taxes. It can also refer to the cost they have to pay after calculating their taxes