wk 6

2021/6/6 A Friend Has Mentioned That She Has Read Somewhere… | Assignment guruh.com

https://www.Assignment guruh.com/homework-help/questions-and-answers/friend-mentioned-read-somewhere-following-variables-used-predict-bankruptcy-company-debt-r-q57… 1/2

Was this answer helpful? 1 0

home / study / business / �nance / �nance questions and answers / a friend has mentioned that she has read somewhere that the following varia…

…

(1 bookmark)

A friend has mentioned that she has read somewhere that the following variables can be used to predict
bankruptcy: (a) the company debt ratio; (b) the interest coverage; (c) the amount of cash relative to sales
or assets; (d) the return on assets; (e) the market-to-book ratio; (f) the recent return on the stock; (g) the
volatility of the stock returns. The problem is that she can’t remember whether a high value of each
variable implies a high or a low probability of bankruptcy. Can you help her out?

Anonymous answered this
15,114 answers

A. high company debt ratio will always re�ect risk related to insolvency because when the debt ratio will
be higher, it would be related to a higher risk related to bankruptcy and hence high value of debt ratio is
meaning high probability of bankruptcy.

B. high value of interest coverage ratio will mean that the company is generating higher amount of income
in order to cover with the interest and hence the risk related to bankruptcy will be lower so when the
higher interest coverage ratio will be there, the probability of bankruptcy would be lower

C. if there is a high amount of cash relative to sales or asset, then there is a low risk related to insolvency
because there will be a higher liquidity on the hands of the company. Hence the probability of bankruptcy
will be lower.

D. If there is high return on assets, it will mean that the probability of bankruptcy will also be lower
because when there will be a higher return generated by the company on its assets it is related to safe
heaven for the company and probability of bankruptcy will be lower

E. If the market to book ratio is higher it will mean that the risk related to bankruptcy and insolvency is
lower

F. If the return on stock is higher, the risk related to bankruptcy is lower because it is meaning that the
company is providing with the high rate of return in market

G. when the volatility of the stock return is higher, it will mean that the probability of bankruptcy will also
be higher because it is a high beta company and it is having a higher amount of systematic risk.

Comment

Up next for you in

Problem 1: Magna
Charter
has been asked to
operate a
Beaver bush plane for a
mining company
exploring in
Yukon. Magna will have a

See answer

One example that
contradicts
with the Efficient Market
Hypothesis. and one
example
that supports the Efficient
Market Hypothesis?

See answer

See more questions
for subjects you study

Question: A friend has mentioned that she has read somewhere that th

Expert Answer



Questions viewed by other students

Q: Magna Charter has been asked to operate a Beaver bush plane for a mining company exploring north and west of
Fort Liard. Magna will have a �rm 1-year contract with the mining company and expects that the contract will be

My Textbook Solutions

Principles of
Corporate…
10th Edition

Principles of
Corporate…
9th Edition

Principles of
Corporate…
10th Edition

View all solutions

Post a question
Answers from our experts for your tough
homework questions

Enter question

Continue to post
20 questions remaining

Snap a photo from your
phone to post a question
We’ll send you a one-time download
link

888-888-8888 Text me

By providing your phone number, you agree to
receive a one-time automated text message with a
link to get the app. Standard messaging rates may
apply.

Find solutions for your homework Search

  Textbook Solutions Expert Q&A Practice Study Pack 

https://www.Assignment guruh.com/

https://www.Assignment guruh.com/study

https://www.Assignment guruh.com/homework-help/business

https://www.Assignment guruh.com/homework-help/business-finance-s11

https://www.Assignment guruh.com/homework-help/questions-and-answers/finance-archive

https://www.Assignment guruh.com/homework-help/questions-and-answers/problem-1-magna-charter-asked-operate-beaver-bush-plane-mining-company-exploring-yukon-mag-q55096775

https://www.Assignment guruh.com/homework-help/questions-and-answers/one-example-contradicts-efficient-market-hypothesis-one-example-supports-efficient-market–q20783107

https://www.Assignment guruh.com/study

https://www.Assignment guruh.com/homework-help/principles-of-corporate-finance-10th-edition-solutions-9780077475758

https://www.Assignment guruh.com/homework-help/principles-of-corporate-finance-9th-edition-solutions-9780073405100

https://www.Assignment guruh.com/homework-help/principles-of-corporate-finance-s-p-market-insight-10th-edition-solutions-9780077356385

https://www.Assignment guruh.com/study/tbs

https://www.Assignment guruh.com/study

https://www.Assignment guruh.com/study/tbs

https://www.Assignment guruh.com/study/qa

https://www.Assignment guruh.com/study/v2/practice

2021/6/6 A Friend Has Mentioned That She Has Read Somewhere… | Assignment guruh.com

https://www.Assignment guruh.com/homework-help/questions-and-answers/friend-mentioned-read-somewhere-following-variables-used-predict-bankruptcy-company-debt-r-q57… 2/2

COMPANY

LEGAL & POLICIES

CHEGG PRODUCTS AND SERVICES

CHEGG NETWORK

CUSTOMER SERVICE

© 2003-2021 Assignment guruh Inc. All rights reserved.

renewed for the 7-year duration of the exploration program. Magna has the following choices: A. Purchase a plane
for $1,000,000 B. Arrange for a 7-year operating…

A: See answer

Q: Maple Aircraft has issued a 4¾% convertible subordinated debenture due 3 years from now. The conversion price is
$47.00 and the debenture is callable at 102.75% of face value. The market price of the convertible is 91% of face
value, and the price of the common is $41.50. Assume that the value of the bond in the absence of a conversion
feature is about 65% of face value. In the…

A: See answer

Show more 

  Textbook Solutions Expert Q&A Practice Study Pack 

http://www.paypal.com/

http://www.bbb.org/sanjose/business-reviews/books-textbooks-new-and-used/Assignment guruhcom-in-santa-clara-ca-238456

https://www.Assignment guruh.com/study

https://www.Assignment guruh.com/study/tbs

https://www.Assignment guruh.com/study/qa

https://www.Assignment guruh.com/study/v2/practice