Question

to earn a high rating from the bond rating agencies, a company would want to have...

to earn a high rating from the bond rating agencies, a company would want to have I. A high cash ratio II. A high return on capital ratio III. A high total debt ratio

Homework Answers

Answer #1

cash ratio is an indication that a firm is having a lot of cash in order to pay of its current debt's as well as its future debts and it is hedged against any kind of liquidity risk and solvency risk. These earn high credit rating from rating agency.

High debt ratio is bad for the firm and a cause of low credit rating. High return on capital is good for shareholders and it is not the primary thing of consideration while deciding the credit rating.

So the correct answer would be answer (I) HIGH CASH RATIO.

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