1. The following is the most appropriate reason that short-term creditors are very interested in the Company's liquidity is because a. Company liquidity is the total wealth of the company b. Liquidity is a measure of the Company's ability to earn profits c. Liquidity is the level of a company's ability to pay off all its obligations d. Company liquidity is a guarantee of the company's ability to pay off short-term obligations
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- True (t) or False (f) _____ A company whose current liabilities exceed its current assets may have a liquidity problemUnder standard accounting rules, it is possible for a company’s liabilities to exceed its assets. When this occurs,the owners’ equity is negative. Can this happen with market values? Why or why not?Explain what "financial distress" means. Let's say that a company is in financial difficulties, and explain how and why it might affect its equity.
- 1. Refers to the inability of the business to meet its obligations as they mature on account of insufficient resources. A. Default risk B. Interest-rate risk C. Purchasing power risk D. Liquidity risk 2. A type of risk that relates to changes in the prime interest rate which have significant effects on the cost of money but not directly on the liquidity of the business. A. Financial risk B. Interest-rate risk C. Purchasing power risk D. Liquidity risk 3. Refers to the changes in the conditions and those variables affecting the cost of capital, capital structure and also management decisions made to directly influence the market price of a stock. A. Financial risk B. Interest-rate risk C. Purchasing power risk D. Liquidity riskDo you agree with each of the following statements? Explain. •EBITDA makes companies with asset-heavy balance sheets look healthier than they may actually be.•EBITDA portrays a company’s debt service ability— but only some types of debt.•EBITDA isn’t a determinant of cash flow at all.The threshold for a company's balance sheet liquidity to be considered ok is…?
- Measures of a company's liquidity are concerned with the frequency and amounts of dividend payments, true or false?EBITDA makes companies with asset-heavy balance sheets look healthier than they may actually be.• EBITDA portrays a company’s debt service ability— but only some types of debt.• EBITDA isn’t a determinant of cash flow at all.How to incease profitability in a service company if Operating cash does not cover debt?
- What are the sign that a company debt is high?4 . Both accounts payable and deferred revenue are classifi ed as current liabilities. Discuss the following statements: A . When assessing a company’s liquidity, the implication of amounts in accounts payable diff ers from the implication of amounts in deferred revenue. B . Some investors monitor amounts in deferred revenue as an indicator of future revenue growth.What are lines of credit? From the viewpoint of a short-term creditor, why do lines of credit increase a company’s liquid-ity? How are the unused portions of these lines presented in financial statements?