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To Determine the Ability of a Company to Service Debt

question 90

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To determine the ability of a company to service debt, you would calculate the debt ratio.


Definitions:

Semi-annual Payments

Payments that are made twice a year as a means to fulfill a financial obligation.

Loan

A borrowed amount of money that should be returned along with an additional interest payment.

Nominal Interest Rate

The stated annual interest rate on which the compound-interest calculation is based.

Annually Compounded

Interest on an investment that is calculated once a year on both the initial principal and the accumulated interest from previous periods.

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