Carlton, Inc

question 139

Multiple Choice

Carlton, Inc. presented the following information in a note to its financial statements for the year ending December 31, 2016: The company has a loan agreement with Beachside Bank that states:
1) The current ratio should remain at least 2.0 to 1 at all times.
2) The debt-to-equity ratio should not exceed .7 to 1 at any time.
3) The times-interest-earned should be 5.0 or better.
4) The inventory-turnover should be 4.0 or better.
The ratios at year-end are: current ratio, 2.3 to 1; debt-to-equity ratio, .6 to 1; times-interest-earned, 7.1; and inventory-turnover, 3.7. Which of the following statements is true?

• A) Carlton was in default because of the inventory turnover.
• B) Carlton was in default because of the current ratio.
• C) Carlton was in default because of the debt-to-equity ratio.
• D) Carlton was in default because of the times-interest-earned.

---

Definitions:

Probation Officers

Individuals appointed to supervise offenders who are either released on probation instead of serving time in prison or have already served a part of their sentences.

Principals

Leaders of schools or educational institutions responsible for the administration, management, and implementation of educational policies.

Norm Violations

Behaviors that deviate from accepted social norms or expectations, which can lead to social disapproval or sanctions.

Tolerant

Characterized by a willingness to accept feelings, habits, or beliefs that are different from one's own.