Because High Debt Increases the Likelihood of Bankruptcy, It Can

question 84

True/False

Because high debt increases the likelihood of bankruptcy, it can lead to a downgrade in the firm's credit rating by agencies such as Moody's and Standard & Poor's.

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Definitions:

Capital Projects Funds

Governmental accounting funds used to account for financial resources that are allocated for the acquisition or construction of major capital assets by a government, except those financed by proprietary funds.

Debt Service Funds

Governmental funds used to account for the accumulation of resources for, and the payment of, long-term debt principal and interest.

Restricted

Refers to funds or assets that are earmarked for specific purposes and cannot be used for general expenditures.

Nonspendable

Funds not available for spending because they are legally or contractually required to remain intact.