Lenders and Creditors Are Most Concerned with a Company's

question 30

Multiple Choice

Lenders and creditors are most concerned with a company's

• A) profitability.
• B) adherence to covenants.
• C) solvency.
• D) cash flows.

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Definitions:

Cost Minimization

The process of reducing expenses to the lowest possible level while still achieving the desired level of output or quality.

Normal Rate Of Return

A rate of return on capital that is just sufficient to keep owners and investors satisfied. For relatively risk-free firms, it should be nearly the same as the interest rate on risk-free government bonds.

Economic Loss

A situation where the cost of making a product is greater than the revenue gained from selling it, resulting in a negative economic outcome.

Normal Rate Of Return

The average expected or required return on an investment or project, reflecting the usual profit level for the market or industry.