A Promise to Perform or Give Value in the Future

question 25

True/False

A promise to perform or give value in the future is sufficient value to make the promisor an HDC.

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Definitions:

Lending Decisions

The process undertaken by financial institutions to assess the creditworthiness of potential borrowers and decide whether to extend credit.

Long-term Borrowing

Debt obtained by a company with repayment terms extending beyond one year, used to finance the company's long-term investments and operations.

Debt Ratio

The debt ratio is a financial metric that compares a company's total liabilities to its total assets, indicating the proportion of a company’s assets that are financed by debt.

Solvency Risk

The risk that a company will not have enough funds to meet its long-term liabilities and financial commitments.