A Banker Is Analyzing a Company That Operates in the Petroleum

question 118

Multiple Choice

A banker is analyzing a company that operates in the petroleum industry.Which of the following might be a major consideration in determining whether the company should receive a loan?

• A)The petroleum industry suffers from political pressures concerning the selling price of its products.
• B)Inflation has been high for several years in a row.
• C)All companies in the petroleum industry use the same accounting principles.
• D)The company has a large amount of interest payments related to many outstanding loans.

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Definitions:

Funding Structure

Refers to the composition of an organization’s capital, including the mix of its debt and equity financing.

Parent Entity

A company that holds a controlling interest in one or more subsidiaries, giving it control over their operations and policies.

Sub-groups

are smaller, specific groups formed within a larger group, often with a particular focus or task within the broader organization or study.

Potential Voting Rights

Voting rights that are not currently exercisable or convertible but could potentially give the holder control or significant influence over the decision-making of an entity.