The reason for the problems created by the economic downturn to the companies that borrowed heavily. Introduction: Economic downturn is situation where the real gross domestic product of the country falls and economy shows the negative growth rate. The economy suffers a lot in an economic downturn, the stock markets crash and the banks fail.

Question

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Answer 1

Question

Chapter 22, Problem 1BCQ

To determine

The reason for the problems created by the economic downturn to the companies that borrowed heavily.

Introduction: Economic downturn is situation where the real gross domestic product of the country falls and economy shows the negative growth rate. The economy suffers a lot in an economic downturn, the stock markets crash and the banks fail.

Expert Solution & Answer

Explanation of Solution

Economic downturn will curtail the company’s ability to serve the debt. This will negatively affect the credit rating of the company and company will not be able to repay the existing debt or take additional loan from the market. In case of economic downturn sales and revenue profit of the company decline and because of this declined sale and revenue, the companies will not be able to repay the debts.

Due to the non-payment of debt borrowed and decline in credit rating, bankruptcy may be declared for the company. Thus, economic downturn can cause many problems for the companies that borrowed heavily.

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Answer 2

Question

Chapter 22, Problem 1BCQ

To determine

The reason for the problems created by the economic downturn to the companies that borrowed heavily.

Introduction: Economic downturn is situation where the real gross domestic product of the country falls and economy shows the negative growth rate. The economy suffers a lot in an economic downturn, the stock markets crash and the banks fail.

Expert Solution & Answer

Explanation of Solution

Economic downturn will curtail the company’s ability to serve the debt. This will negatively affect the credit rating of the company and company will not be able to repay the existing debt or take additional loan from the market. In case of economic downturn sales and revenue profit of the company decline and because of this declined sale and revenue, the companies will not be able to repay the debts.

Due to the non-payment of debt borrowed and decline in credit rating, bankruptcy may be declared for the company. Thus, economic downturn can cause many problems for the companies that borrowed heavily.

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Answer 3

Question

Chapter 22, Problem 1BCQ

To determine

The reason for the problems created by the economic downturn to the companies that borrowed heavily.

Introduction: Economic downturn is situation where the real gross domestic product of the country falls and economy shows the negative growth rate. The economy suffers a lot in an economic downturn, the stock markets crash and the banks fail.

Expert Solution & Answer

Explanation of Solution

Economic downturn will curtail the company’s ability to serve the debt. This will negatively affect the credit rating of the company and company will not be able to repay the existing debt or take additional loan from the market. In case of economic downturn sales and revenue profit of the company decline and because of this declined sale and revenue, the companies will not be able to repay the debts.

Due to the non-payment of debt borrowed and decline in credit rating, bankruptcy may be declared for the company. Thus, economic downturn can cause many problems for the companies that borrowed heavily.

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Answer 4

Question

Chapter 22, Problem 1BCQ

To determine

The reason for the problems created by the economic downturn to the companies that borrowed heavily.

Introduction: Economic downturn is situation where the real gross domestic product of the country falls and economy shows the negative growth rate. The economy suffers a lot in an economic downturn, the stock markets crash and the banks fail.

Expert Solution & Answer

Explanation of Solution

Economic downturn will curtail the company’s ability to serve the debt. This will negatively affect the credit rating of the company and company will not be able to repay the existing debt or take additional loan from the market. In case of economic downturn sales and revenue profit of the company decline and because of this declined sale and revenue, the companies will not be able to repay the debts.

Due to the non-payment of debt borrowed and decline in credit rating, bankruptcy may be declared for the company. Thus, economic downturn can cause many problems for the companies that borrowed heavily.

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Answer 5

Chapter 22, Problem 1BCQ

To determine

The reason for the problems created by the economic downturn to the companies that borrowed heavily.

Introduction: Economic downturn is situation where the real gross domestic product of the country falls and economy shows the negative growth rate. The economy suffers a lot in an economic downturn, the stock markets crash and the banks fail.

Expert Solution & Answer

Explanation of Solution

Economic downturn will curtail the company’s ability to serve the debt. This will negatively affect the credit rating of the company and company will not be able to repay the existing debt or take additional loan from the market. In case of economic downturn sales and revenue profit of the company decline and because of this declined sale and revenue, the companies will not be able to repay the debts.

Due to the non-payment of debt borrowed and decline in credit rating, bankruptcy may be declared for the company. Thus, economic downturn can cause many problems for the companies that borrowed heavily.

Answer 6

Chapter 22, Problem 1BCQ

To determine

The reason for the problems created by the economic downturn to the companies that borrowed heavily.

Introduction: Economic downturn is situation where the real gross domestic product of the country falls and economy shows the negative growth rate. The economy suffers a lot in an economic downturn, the stock markets crash and the banks fail.

Expert Solution & Answer

Explanation of Solution

Economic downturn will curtail the company’s ability to serve the debt. This will negatively affect the credit rating of the company and company will not be able to repay the existing debt or take additional loan from the market. In case of economic downturn sales and revenue profit of the company decline and because of this declined sale and revenue, the companies will not be able to repay the debts.

Due to the non-payment of debt borrowed and decline in credit rating, bankruptcy may be declared for the company. Thus, economic downturn can cause many problems for the companies that borrowed heavily.

Answer 7

Chapter 22, Problem 1BCQ

To determine

The reason for the problems created by the economic downturn to the companies that borrowed heavily.

Introduction: Economic downturn is situation where the real gross domestic product of the country falls and economy shows the negative growth rate. The economy suffers a lot in an economic downturn, the stock markets crash and the banks fail.

Answer 8

Expert Solution & Answer

Explanation of Solution

Economic downturn will curtail the company’s ability to serve the debt. This will negatively affect the credit rating of the company and company will not be able to repay the existing debt or take additional loan from the market. In case of economic downturn sales and revenue profit of the company decline and because of this declined sale and revenue, the companies will not be able to repay the debts.

Due to the non-payment of debt borrowed and decline in credit rating, bankruptcy may be declared for the company. Thus, economic downturn can cause many problems for the companies that borrowed heavily.