Which of the Following Trends Can Be Unfavorable from the Viewpoint

question 31

Multiple Choice

Which of the following trends can be unfavorable from the viewpoint of a bondholder?

• A)The issuing company's debt ratio is steadily declining.
• B)The issuing company's interest coverage ratio is steadily rising.
• C)Market interest rates are steadily rising.
• D)The issuing company's net cash flow from operating activities is steadily increasing.

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Definitions:

Retained Earnings

The portion of a company’s profits that is kept or retained and not distributed to shareholders as dividends.

General Reserve

Funds set aside from profits for undisclosed general purposes, serving as a buffer for future financial uncertainties or for any identified but not immediate needs.

Joint Ventures

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or project, sharing both the profits and risks.

AASB 128/IAS 28

A standard specifying the accounting treatment for investments in associates and joint ventures, focusing on the application of the equity method.