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%

---

Definitions:

Perceptual-Motor Development

Refers to the progression of children's ability to integrate sensory information with motor activities, allowing them to interact effectively with their environment.

Social Interaction

The process by which individuals act and react in relation to others, shaping their behavior through communication and relationships.

Infants

Young children from birth to 1 year of age, who are in the earliest stage of human life.

Deliberate Practice

A highly structured activity engaged in with the specific goal of improving performance, requiring effort and attention.