6Within the context of the 5 Cs of credit, which of the following statements show the weakness of acompany's capacity? Select ALL correct answers.Slowing inventory turnoverLow debt to equity ratioRecent success in raising equityHigh funded debt-to-EBITDA ratio

One of the five basic elements of credit is capacity. The ability of the company to repay debt or…

Answered: 6 Within the context of the 5 Cs of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which statement is most correct? * A. Since debt financing raises the firm’s financial risk, increasing debt ratio will increase WACC. B. Since debt financing is cheaper than equity financing, increasing debt ratio will reduce WACC. C. Increasing a firm’s debt ratio will typically reduce the marginal costs of both debt and equity financing; however, it still may raise the firm’s WACC. D. Statements a and c are correct. E. None of the above
QUESTION 4 When evaluating a company's liquidity, O a. The quick ratio is typically more conservative than the current ratio. O b. Ratio analysis is not helpful. O c. The current ratio and the quick ratio are two names for the same thing. O d. The current ratio is always more consevative than the quick ratio.
37 Which of the following ratios by itself indicates that the company has very little debt and may be under-leveraged? Select ALL correct answers. Low debt to EBITDA ratio High debt to EBITDA ratio High debt to equity ratio Low debt to equity ratio
Which of the following is most consistent with using debt to reduce agency costs or conflicts? Question 11 options: Increasing debt reduces a firm’s business risk The interest paid on debt reduces taxable income and income taxes The interest paid on debt reduces cash that management of a firm might otherwise waste or use poorly The issuance of debt helps firms increase their credit rating
Case Study: Accounting Assets and Liabilities Introduction: In the realm of accounting, understanding and managing assets and liabilities are fundamental for assessing the financial health and stability of an organization. This case study delves into the accounting practices of XYZ Corporation, a manufacturing company, to illustrate the significance of proper asset and liability management. XYZ Corporation's Asset Management: XYZ Corporation, in its commitment to effective asset management, carefully categorizes its assets into current and non-current. Current assets, such as cash, accounts receivable, and inventory, are monitored closely for liquidity and short-term financial health. Non-current assets, including property, plant, and equipment, are assessed for their long-term value and depreciation. Liability Management and Debt Ratio: To ensure a healthy balance between assets and liabilities, XYZ Corporation meticulously manages its liabilities. Current liabilities, like accounts…
Which of the following statements is false?(a) The quickest way to determine whether a firm has too much debt is to calculate the debt-to-equity ratio.(b) The best guideline to determine the firm's liquidity is to calculate the current ratio.(c) From the investor's point of view, the rate of return on common equity is a good indicator of whether the firm is generating an acceptable return to the investor.( d) We can determine the operating margin by expressing net income as a percentage of total sales.

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6 Within the context of the 5 Cs of credit, which of the following statements show the weakness of a company's capacity? Select ALL correct answers. Slowing inventory turnover Low debt to equity ratio Recent success in raising equity High funded debt-to-EBITDA ratio