Otella Borrowed $5,000 from a Bank and Was Behind in Her

question 18

Multiple Choice

Otella borrowed $5,000 from a bank and was behind in her payments. Later, Armand wrote to the bank that Armand would "make good" Otella's obligations if Otella did not pay. Armand's agreement is:

• A) binding because it is written.
• B) binding because it is supported by consideration.
• C) invalid unless Otella also signs Otella's statement.
• D) not binding because it is not supported by consideration.

---

Definitions:

Owner's Equity

The amount of assets owned by a business's owner after all liabilities have been deducted.

Average Inventory

The mean amount of inventory a business holds over a certain period of time, calculated to understand inventory levels and turnover.

Financial Obligations

Commitments to pay money owed to lenders or creditors, which can include loans, leases, contracts, and other forms of debt.

Debt Ratio

A financial metric that measures the proportion of a company’s total debt to its total assets, indicating the company's leverage level.