The impact on interest coverage due to the dramatic expansion of corporate debt. Introduction: Corporate Debt: It is the debt owed by corporations rather than governments or individuals. It is circulated as commercial paper while long-term debt is circulated as bonds. It is a non-government debt security. Interest coverage ratio: It is a financial ratio used to determine the way a corporation can timely and easily pay interest on its debt.

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Answer 1

Question

Chapter 16, Problem 1DQ

Summary Introduction

To explain: The impact on interest coverage due to the dramatic expansion of corporate debt.

Introduction:

Corporate Debt:

It is the debt owed by corporations rather than governments or individuals. It is circulated as commercial paper while long-term debt is circulated as bonds. It is a non-government debt security.

Interest coverage ratio:

It is a financial ratio used to determine the way a corporation can timely and easily pay interest on its debt.

Expert Solution & Answer

Answer to Problem 1DQ

The impact on interest coverage due to the dramatic expansion of corporate debt was such that the ratio had been brought down to almost less than half the original interest.

Explanation of Solution

Over the years, precisely since 1977, it has been observed by many analysts that there is a dramatic expansion of corporate debt over the last 3 decades. It has a major impact on interest coverage as U.S. manufacturing corporations had to cover their interest 8 times. Not only that, the value of the ratio was brought down to less than half the original value by the 2000s.

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Students have asked these similar questions

A financial analyst at your firm notes that the firm's total interest payments this year were $10 million while total debt outstanding was $80 million, and he concludes that the cost of debt was 12.5%. What is wrong with this conclusion? Only long term debt should be used Only current liabilities should be used Excluded taxes will overestimate the cost of debt Excluding taxes will underestimate the cost of debt None of the above are correct

All of the following affect the balance of the capital account except? bank deposits. purchases of government and corporate securities. purchases of goods and services. loans. These bonds have their coupons reset every two or three years to reflect the current interest rate environment and any changes in the firm’s credit quality? Callable bonds Put bonds Treasury Inflation Protected Securities Extendable notes

It is the policy of the corporation to maintain current ratio of 1.5 to 1.0. Its current liabilities are 400,000 and present current ratio is 2 to 1. How much is the maximum level of new short term loans it can secure without violating the policy?

Answer 2

Question

Chapter 16, Problem 1DQ

Summary Introduction

To explain: The impact on interest coverage due to the dramatic expansion of corporate debt.

Introduction:

Corporate Debt:

It is the debt owed by corporations rather than governments or individuals. It is circulated as commercial paper while long-term debt is circulated as bonds. It is a non-government debt security.

Interest coverage ratio:

It is a financial ratio used to determine the way a corporation can timely and easily pay interest on its debt.

Expert Solution & Answer

Answer to Problem 1DQ

The impact on interest coverage due to the dramatic expansion of corporate debt was such that the ratio had been brought down to almost less than half the original interest.

Explanation of Solution

Over the years, precisely since 1977, it has been observed by many analysts that there is a dramatic expansion of corporate debt over the last 3 decades. It has a major impact on interest coverage as U.S. manufacturing corporations had to cover their interest 8 times. Not only that, the value of the ratio was brought down to less than half the original value by the 2000s.

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Answer 3

Question

Chapter 16, Problem 1DQ

Summary Introduction

To explain: The impact on interest coverage due to the dramatic expansion of corporate debt.

Introduction:

Corporate Debt:

It is the debt owed by corporations rather than governments or individuals. It is circulated as commercial paper while long-term debt is circulated as bonds. It is a non-government debt security.

Interest coverage ratio:

It is a financial ratio used to determine the way a corporation can timely and easily pay interest on its debt.

Expert Solution & Answer

Answer to Problem 1DQ

The impact on interest coverage due to the dramatic expansion of corporate debt was such that the ratio had been brought down to almost less than half the original interest.

Explanation of Solution

Over the years, precisely since 1977, it has been observed by many analysts that there is a dramatic expansion of corporate debt over the last 3 decades. It has a major impact on interest coverage as U.S. manufacturing corporations had to cover their interest 8 times. Not only that, the value of the ratio was brought down to less than half the original value by the 2000s.

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Answer 4

Question

Chapter 16, Problem 1DQ

Summary Introduction

To explain: The impact on interest coverage due to the dramatic expansion of corporate debt.

Introduction:

Corporate Debt:

It is the debt owed by corporations rather than governments or individuals. It is circulated as commercial paper while long-term debt is circulated as bonds. It is a non-government debt security.

Interest coverage ratio:

It is a financial ratio used to determine the way a corporation can timely and easily pay interest on its debt.

Expert Solution & Answer

Answer to Problem 1DQ

The impact on interest coverage due to the dramatic expansion of corporate debt was such that the ratio had been brought down to almost less than half the original interest.

Explanation of Solution

Over the years, precisely since 1977, it has been observed by many analysts that there is a dramatic expansion of corporate debt over the last 3 decades. It has a major impact on interest coverage as U.S. manufacturing corporations had to cover their interest 8 times. Not only that, the value of the ratio was brought down to less than half the original value by the 2000s.

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Answer 5

Chapter 16, Problem 1DQ

Summary Introduction

To explain: The impact on interest coverage due to the dramatic expansion of corporate debt.

Introduction:

Corporate Debt:

It is the debt owed by corporations rather than governments or individuals. It is circulated as commercial paper while long-term debt is circulated as bonds. It is a non-government debt security.

Interest coverage ratio:

It is a financial ratio used to determine the way a corporation can timely and easily pay interest on its debt.

Expert Solution & Answer

Answer to Problem 1DQ

The impact on interest coverage due to the dramatic expansion of corporate debt was such that the ratio had been brought down to almost less than half the original interest.

Explanation of Solution

Over the years, precisely since 1977, it has been observed by many analysts that there is a dramatic expansion of corporate debt over the last 3 decades. It has a major impact on interest coverage as U.S. manufacturing corporations had to cover their interest 8 times. Not only that, the value of the ratio was brought down to less than half the original value by the 2000s.

Answer 6

Chapter 16, Problem 1DQ

Summary Introduction

To explain: The impact on interest coverage due to the dramatic expansion of corporate debt.

Introduction:

Corporate Debt:

It is the debt owed by corporations rather than governments or individuals. It is circulated as commercial paper while long-term debt is circulated as bonds. It is a non-government debt security.

Interest coverage ratio:

It is a financial ratio used to determine the way a corporation can timely and easily pay interest on its debt.

Expert Solution & Answer

Answer to Problem 1DQ

The impact on interest coverage due to the dramatic expansion of corporate debt was such that the ratio had been brought down to almost less than half the original interest.

Explanation of Solution

Over the years, precisely since 1977, it has been observed by many analysts that there is a dramatic expansion of corporate debt over the last 3 decades. It has a major impact on interest coverage as U.S. manufacturing corporations had to cover their interest 8 times. Not only that, the value of the ratio was brought down to less than half the original value by the 2000s.

Answer 7

Chapter 16, Problem 1DQ

Summary Introduction

To explain: The impact on interest coverage due to the dramatic expansion of corporate debt.

Introduction:

Corporate Debt:

It is the debt owed by corporations rather than governments or individuals. It is circulated as commercial paper while long-term debt is circulated as bonds. It is a non-government debt security.

Interest coverage ratio:

It is a financial ratio used to determine the way a corporation can timely and easily pay interest on its debt.

Answer 8

Expert Solution & Answer

Answer to Problem 1DQ

The impact on interest coverage due to the dramatic expansion of corporate debt was such that the ratio had been brought down to almost less than half the original interest.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Over the years, precisely since 1977, it has been observed by many analysts that there is a dramatic expansion of corporate debt over the last 3 decades. It has a major impact on interest coverage as U.S. manufacturing corporations had to cover their interest 8 times. Not only that, the value of the ratio was brought down to less than half the original value by the 2000s.

Answer 12

Ch. 16 - Prob. 1DQ Ch. 16 - What are some specific features of bond...Ch. 16 - What is the difference between a bond agreement...Ch. 16 - Discuss the relationship between the coupon rate...Ch. 16 - Prob. 5DQ Ch. 16 - What method of â€œbond repaymentâ€� reduces debt...Ch. 16 - What is the purpose of serial repayments and...Ch. 16 - Under what circumstances would a call on a bond be...Ch. 16 - Discuss the relationship between bond prices and...Ch. 16 - Prob. 10DQ

Answer to Problem 1DQ

Explanation of Solution

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