Question

2. What are some factors to consider in evaluating a company's ability to make payments on...

2. What are some factors to consider in evaluating a company's ability to make payments on outstanding debt? Please explain the factors rather than just providing a list.

Homework Answers

Answer #1

Company's ability to make payments on outstanding debt

1. Free Cash Flow:- cash inflow during specific period which can be used to met its liabilities

2.Net Income:- This depicts the margin over sales and the progit that company earnered over its liabilities over that period which will be used to met outstanding debt.

3.net worth of p=company = total assets - total liabilities

this gives clear picture that if company is liquidated today then how much liablities are met and tey are still left with what cash/cash equivilaents.

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