Which of the Following Is a Technique Lenders Use to Alleviate

question 74

Multiple Choice

Which of the following is a technique lenders use to alleviate the moral hazard problem?

• A) checking credit ratings
• B) monitoring borrower activity
• C) restrictive covenants
• D) all of the above

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay off its short-term liabilities with its short-term assets.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.

Liquidity

The ability of an asset to be quickly converted into cash without significant loss in value.

Times Interest Earned Ratio

A financial metric that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.