You Would Like to Borrow Money Three Years from Now

question 74

Multiple Choice

You would like to borrow money three years from now to build a new building.In preparation for applying for that loan, you are in the process of developing target ratios for your firm.Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future?

• A)Times interest earned = 1.7; debt-equity ratio = 1.6
• B)Times interest earned = 1.5; debt-equity ratio = 1.2
• C)Cash coverage ratio = .8; debt-equity ratio = .8
• D)Cash coverage ratio = 2.6; debt-equity ratio = .3
• E)Cash coverage ratio = .5; total debt ratio = .2

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Definitions:

Practicality

When selecting a test, one of the cornerstones of test worthiness is practicality. Practical concerns include time, cost, format, readability, and ease of administration, scoring, and interpretation.

Group Format

A method of presenting or facilitating activities, treatments, or learning in a group setting rather than individually.

Individualized Tests

Tests tailored to assess specific abilities or characteristics of an individual, often used in educational or clinical settings.

Cross-Cultural Fairness

The principle that assessment tools and processes should be equally valid and fair across different cultural groups, minimizing bias.