Assume that XYZ Company has a loan agreement that states that it must maintain a fixed-charge coverage ratio greater tha

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Assume that XYZ Company has a loan agreement that states that it
must maintain a fixed-charge coverage ratio greater than or equal
to 1.0 They have net income of $75, noncash charges of $25, current
loan maturities of $60, stock repurchases of $10, and replacement
capital expenditures of $20. Which of the following statements is
true?
1) Multiple choice question.
- Their fixed-coverage ratio is 1.1.
- Their fixed-coverage ratio is 2.0.
- They have violated their affirmative covenant since their
fixed-coverage charge is less than 1.0.
- They can pay a dividend of no more than $20 to remain within
the covenant.
2) The net worth safety margin can be calculated as the
difference between a firm's
Multiple choice question.
- actual minimum net worth and covenant minimum net worth.
- actual maximum net worth and covenant maximum net worth.
- covenant minimum net worth and covenant maximum net worth.
- actual minimum net worth and actual maximum net worth.
3) Which of the following are true of commercial paper?
Select all that apply
Multiple select question.
- It includes an interest rate significantly below the rate a
bank would charge.
- It is usually secured by a bank credit line.
- It is sold directly to investors by large and financially
sound companies.
- It is a variation on the seasonal credit line.
4) Which of the following assess and grade the
creditworthiness of companies and public entities that sell debt to
investors?
Multiple select question.
- Securities and Exchange Commission
- Internal Revenue Service
- Standard & Poor's Corp.
- Moody's Investors Service
- Fitch Inc.