Question

29)   Credit risk is the risk of default on a debt that may arise from a borrower...

29)   Credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments.  If you were to measure a company’s credit risk, which ratios that you would analyze?

                                                                                                                                           

  1. TDR
  2. P/E
  3. TIER
  4. CASH COVERAGE
  5. MKT/BOOK
  6. A, C, and D.   
  7. A and C
  8. B and E
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

I would be looking for following ratios to analyse the credit risk-

(A) Total Debt service ratio will be helping me in analysing the ability of the company in order to service total debt and remain solvent

(C) TIER - times interest earned ratio will be helping me to understand the cash generation capability of the company and the ability of company in order to pay off its debt in the short term.

(D) Cash coverage ratio will be providing me with an idea about the company's ability to pay its borrowers so it will also be helping me to understand credit risk related to debt Capital.

Price earning ratio and market to book ratio is not relevant in the case of determination of credit risk.

Correct answer will be option (F) A, C and D

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Credit risk is the risk of default on a debt that may arise from a borrower...
Credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments.  If you were to measure a company’s credit risk, which ratios that you would analyze?                                                                                                                                             TDR P/E TIER CASH COVERAGE MKT/BOOK A, C, and D.    A and C B and E
Match the following terms to the definition. Interest Rate Risk Reinvestment Rate Risk Default Risk Floating...
Match the following terms to the definition. Interest Rate Risk Reinvestment Rate Risk Default Risk Floating rate bond Zero Coupon Bond Consol Bond A. Risk associated with price fluctuations caused by interest rate changes B. This is the risk that a firm's cost of debt will fall and as a result reinvested coupon payments will earn less yield moving forward. C. Risk that the Borrower will not make payments on time or in full D. Coupon Payments typically follow a...
How are investors in pass-through securities protected against default risk emanating from the mortgagees and the...
How are investors in pass-through securities protected against default risk emanating from the mortgagees and the FI/trustee? A) In cases where the bank or the trustee defaults on the timely pass-through of the mortgage payments, GNMA will make the payments. B) State governments insure them and thus, make the payments. C) There is no credit risk and thus, no default risk. D) The local government will chip in and make half of the payments. E) None of the above
Select the correct statement. Lenders: Select one: a. May suffer credit risk. b. Have debt liabilities....
Select the correct statement. Lenders: Select one: a. May suffer credit risk. b. Have debt liabilities. c. Are short debt. d. Benefit from lower interest rates when they have better credit histories. e. Are debtors.
Which of the following is true regarding setting personal debt limits? Can be more than one...
Which of the following is true regarding setting personal debt limits? Can be more than one answer. a. Your mortgage loan and all credit card charges, especially those paid in full every month, are included in the debt payments-to-disposable income method. b. The debt limit according to the continuous-debt method is a four-year payoff period. c. For most people, your debt limit should be lower than what creditors are willing to offer. d. Under the debt-to-income method, the recommended maximum...
Multiple Choice 11. Prepayment risk is: A. the risk you will not receive the cash flows...
Multiple Choice 11. Prepayment risk is: A. the risk you will not receive the cash flows on a mortgage-backed security B. the risk that you will receive the cash flows sooner than expected and be forced to invest at a lower rate. C. the risk that you will receive the cash flows later than expected and not be able to invest at current, higher rates. 12. Based on the video Inside the Meltdown, it appeared that the main reason Lehman...
QUESTION 1 Suppose that you want to hedge your long position in Colombian hard currency debt...
QUESTION 1 Suppose that you want to hedge your long position in Colombian hard currency debt buy buying 5-year Credit Default Swap (CDS) protection. The notional amount you want to hedge is US$50 million and the CDS trades at 200 bps. How much will be your quarterly payment to the seller of CDS? Formula: Quarterly Premium = Notional x Swap Rate (in decimal) x (92/360) A. US$1 million B. US$55,555.37 C. US$255,555.56 D. US$246,575.34 E. US$250,000 QUESTION 2 The sudden...
.1. Which of the following is not a correct statement about accounting? a. Generally accepted accounting...
.1. Which of the following is not a correct statement about accounting? a. Generally accepted accounting principles (GAAP) is a set of accounting standards used in the preparation of financial statements. b. Financial Accounting Standards Board (FASB) is a private organization delegated by the Federal Reserve with the responsibility to establish the GAAP. c. Management accountants work with a business or nonprofit organizations, preparing reports and analyzing financial info. d. Public accountants provide a variety of accounting services for clients...
9. What can be taken off a credit report? A. Only Inaccurate items but not public...
9. What can be taken off a credit report? A. Only Inaccurate items but not public records B. Any inaccurate, incomplete, unverifiable accounts, old personal information and public records C. All information can come off at will D. Both A and B E. None above 10. How can one establish credit? A. Apply for a credit card B. Apply for a secured credit card C. Apply for a secured bank loan D. Become an authorized users in someone’s else credit...
PLEASE MAKE SURE TO EXPLAIN HOW ANSWERS WERE FOUND. THANK YOU Exercise 14.12 Computing Ratios (LO14-7)...
PLEASE MAKE SURE TO EXPLAIN HOW ANSWERS WERE FOUND. THANK YOU Exercise 14.12 Computing Ratios (LO14-7) A condensed balance sheet for Bradford Corporation prepared at the end of the year appears as follows: Assets Liabilities & Stockholders' Equity   Cash $ 104,000   Notes payable (due in 6 months) $ 44,000   Accounts receivable 110,000   Accounts payable 80,000   Inventory 280,000   Long-term liabilities 387,000   Prepaid expenses 60,000   Capital stock, $5 par 300,000   Plant & equipment (net) 570,000   Retained earnings 403,000   Other assets 90,000 Total...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT