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:

Self-Fulfilling Prophecy

A belief or expectation that causes itself to become true due to the behavior it inspires.

Self-Efficacy

A person’s belief in his or her ability to perform a specific task in a particular situation.

Upright Bass

A large stringed musical instrument held vertically and played with a bow or by plucking the strings, commonly used in jazz and classical music.

Music Performance

The act of presenting musical art to an audience through singing, playing instruments, or both.