If a Bank Loan Officer Were Considering a Company's Request

question 28

Multiple Choice

If a bank loan officer were considering a company's request for a loan,which of the following statements is correct?

• A)The lower the company's EBITDA coverage ratio, other things held constant, the lower the interest rate the bank would charge the firm.
• B)Other things held constant, the higher the debt ratio, the lower the interest rate the bank would charge the firm.
• C)Other things held constant, the lower the debt ratio, the lower the interest rate the bank would charge the firm.
• D)The lower the company's TIE ratio, other things held constant, the lower the interest rate the bank would charge the firm.

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Definitions:

Financial Statements

Financial statements are formal records that outline the financial activities and condition of a business, entity, or individual, encompassing the balance sheet, income statement, and cash flow statement.

General Journal

The primary bookkeeping record in double-entry accounting, used to record all transactions by date, before they are posted to individual accounts in the general ledger.

Book of Original Entry

The Book of Original Entry refers to the initial record where financial transactions are documented chronologically.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, thereby resetting the temporary accounts for the next period.