A New Firm Is Developing Its Business Plan

question 63

Multiple Choice

A new firm is developing its business plan.It will require $565,000 of assets,and it projects $452,800 of sales and $354,300 of operating costs for the first year.Management is quite sure of these numbers because of contracts with its customers and suppliers.It can borrow at a rate of 7.5%,but the bank requires it to have a TIE of at least 4.0,and if the TIE falls below this level the bank will call in the loan and the firm will go bankrupt.What is the maximum debt ratio the firm can use? (Hint: Find the maximum dollars of interest,then the debt that produces that interest,and then the related debt ratio.)

• A)49.82%
• B)52.45%
• C)55.21%
• D)58.11%

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Slogan

A short and striking or memorable phrase used in advertising or as a motto.

Standard Form

A recognized or conventional format for presenting information or arguments, typically used to ensure clarity.

Traditional Square of Opposition

A diagrammatic representation of the logical relationships between certain pairs of propositions in Aristotelian logic, showing contradictions, contraries, subcontraries, and subalternation.

A Proposition

A statement or assertion that expresses a judgment or opinion; in logic, a declaration that something is true or false.