The Following Information Was Included in a Note to the 2015

question 129

Multiple Choice

The following information was included in a note to the 2015 financial statements of Romeo Productions: The company has a loan agreement with First National Bank that states:
1. The current ratio must be $2.0$ or higher at all times.
2. The debt-to-equity ratio must not exceed $0.7$ at any time.
3. The times interest earned ratio must be $5.0$ or higher.
4. The inventory turnover ratio must be $4.0$ or higher. The company's ratios are: current ratio,2.3;debt-to-equity ratio,0.6;times interest earned ratio,7.1;and inventory turnover ratio,3.7.Based on this information,the company was in default of its loan agreement because of the

• A)current ratio
• B)debt-to-equity ratio
• C)times interest earned ratio
• D)inventory turnover ratio

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Definitions:

Seasoned Offering

Refers to the issuance of additional securities by a company that has previously issued securities to the public and is therefore considered a more established issuer.

Stock Price

The going rate for buying or selling a single share of a firm's stock in the marketplace.

News Release

An official statement issued to the media and the public to announce significant or notable information about a company, government, or organization.

Holder-of-record Date

The specified date set by a corporation by which one must be registered as a shareholder to be entitled to receive dividends or participate in certain corporate events.