Finance ch. 4 - any assets, and none of its debt must be...

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9. If a bank loan officer were considering a company's request for a loan, which of the following statements would you consider to be CORRECT? A) Other things held constant, the lower the debt ratio, the lower the interest rate the bank would charge the firm. B) The lower the company's TIE ratio, other things held constant, the lower the interest rate the bank would charge the firm. C) The lower the company's EBITDA coverage ratio, other things held constant, the lower the interest rate the bank would charge the firm. D) Other things held constant, the higher the debt ratio, the lower the interest rate the bank would charge the firm. E) Other things held constant, the lower the current asset ratio, the lower the interest rate the bank would charge the firm. Points Earned: 5.0/5.0 Correct Answer(s): A 10. SCENARIO 4-1 The balance sheet and income statement shown below are for Byrd Inc, and the data are to be used for the following questions. Note that the firm has no amortization charges, it does not lease
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Unformatted text preview: any assets, and none of its debt must be retired during the next 5 years (notes payable will be rolled over). BALANCE SHEET Cash $ 140.0 Accounts payable $ 800.0 Accts. receivable 880.0 Notes payable 600.0 Inventories 1,320.0 Accruals 400.0 Total current assets $2,340.0 Total current liabilities $1,800.0 Long-term bonds 1,000.0 Total debt $2,800.0 Common stock (50,000 shares) 200.0 Retained earnings 1,000.0 Net plant & equip. 1,660.0 Total common equity $1,200.0 Total assets $4,000.0 Total liabilities & equity $4,000.0 INCOME STATEMENT Net sales $6,000.0 Operating costs 5,599.8 Depreciation 100.2 EBIT $ 300.0 Less: Interest 96.0 EBT $ 204.0 Less: Taxes 81.6 Net income $ 122.4 OTHER DATA Shares outstanding (millions) 60.00 Common dividends $42.8 Interest rate on N/P and long-term bonds 6.0% Federal plus state income tax rate 40% Year-end stock price $30.60 What is the firm's equity multiplier? A) 2.84 B) 2.67 C) 3.33 D) 3.00 E) 3.16 Points Earned: 0.0/5.0 Correct Answer(s): C...
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Finance ch. 4 - any assets, and none of its debt must be...

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