A banker is analyzing a company which operates in the automotive industry. Which of the following will likely be the banker's most important consideration in determining whether the company should receive a loan?
A) The automotive plant's capacity.
B) Inflation has been consistently high for several years.
C) The company has state-of-the-art automated equipment which enhances the efficiency of its operating process.
D) The company has a large amount of interest payments related to other outstanding loans.
D
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Firms recognize an impairment loss when the carrying amount of a tangible fixed asset is deemed "not recoverable" as specified by GAAP. GAAP defines a carrying amount as "not recoverable" if
a. it is greater than the sum of the cash flows expected from the asset's use and disposal. b. it is greater than the sum of the undiscounted cash flows expected from the asset's use and disposal. c. it is less valuable than its current carrying value. d. it is less valuable than its current fair value.
Clanston Corp., a steel manufacturing giant, announces its plans to merge with another steel manufacturing company, Tralesta Corp. Peter is a major stockholder in Clanston Corp., and his experience suggests that the merger is not going to be a profitable one. Which of the following basic shareholder rights must Peter use to express his disapproval of the merger?
A. Trading rights B. Entitlement to a residual claim on assets C. Entitlement to dividends D. Voting rights
Which of the following statements is CORRECT, holding other things constant?
A. Firms whose assets are relatively liquid tend to have relatively low bankruptcy costs, hence they tend to use relatively little debt. B. An increase in the personal tax rate is likely to increase the debt ratio of the average corporation. C. If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely lead to lower debt ratios for corporations. D. An increase in the company's degree of operating leverage would tend to encourage the firm to use more debt in its capital structure so as to keep its total risk unchanged. E. An increase in the corporate tax rate would in theory encourage companies to use more debt in their capital structures.
When Ruben wanted to start a new online news service, he was skeptical about investing in it because of the financial crisis in his country. However, he was put at ease after learning about the government's policy of levying low federal taxes on startup businesses. In this context, which dimension of the business environment is affected the most?
A. The technological environment B. The social environment C. The economic environment D. The competitive environment