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If You Are a Lender Evaluating a Loan Application and You

question 39

True/False

If you are a lender evaluating a loan application and you calculate the following ratio: (EBIT + Lease payments)/[Interest + Lease payments + (Sinking Fund/(1-T))] then you are calculating a debt service ratio and it should be less than one in order to approve the loan.


Definitions:

Interdependent

Mutually dependent; where two or more entities rely on each other.

Obedience

The act of following orders or instructions from an authority figure, or conforming to rules or laws.

Solomon Asch

A psychologist best known for his research on social conformity.

Leon Festinger

A social psychologist known for his theory of cognitive dissonance, which describes the discomfort felt by an individual when holding contradictory beliefs or values.

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