4.Below are various states of financial distress:a.b.What is the order of increasing gravity that analysts typically consider when assessing credit risk andbankruptcy risk according to a continuum of financial distress?c.d.Problem 31. defaulting on a principal payment on debt2. restructuring debt3. liquidating a firm4. filing for bankruptcy5. failing to make a required interest payment on time5, 1, 2, 3, 45, 2, 1, 4, 31, 5, 2, 4, 31,5, 2, 3, 4I

Assessing credit risk and bankruptcy risk is a critical aspect of financial analysis, particularly…

Below are various states of financial distress: 1. defaulting on a principal payment on debt 2. restructuring debt 3. liquidating a firm 4. filing for bankruptcy 5. failing to make a required interest payment on time What is the order of increasing gravity that analysts typically consider when assessing credit risk and bankruptcy risk according to a continuum of financial distress? a. 5,1, 2, 3, 4 b. 5, 2, 1, 4, 3 c. 1, 5, 2, 4, 3 d. 1, 5, 2, 3, 4 I

Below are various states of financial distress: 1. defaulting on a principal payment on debt 2. restructuring debt 3. liquidating a firm 4. filing for bankruptcy 5. failing to make a required interest payment on time What is the order of increasing gravity that analysts typically consider when assessing credit risk and bankruptcy risk according to a continuum of financial distress? a. 5,1, 2, 3, 4 b. 5, 2, 1, 4, 3 c. 1, 5, 2, 4, 3 d. 1, 5, 2, 3, 4 I

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 13MC: What information can best be elicited from a receivable ratio? A. company performance with current...

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Accrual accounting requires estimates of future outcomes. For example, the reserve for bad debts is a forecast of the amount of current receivables that will ultimately prove uncollectible. Required: Identify and explain three reasons why accounting information might deviate from the underlying economic reality. Cite examples of transactions that might give rise to each of the reasons.
What information can best be elicited from a receivable ratio? A. company performance with current debt collection B. credit extension effect on cash sales C. likelihood of future customer bankruptcy filings D. an increase in future credit sales to current customers
Which of the following is not a way to manage earnings? A. Change the method for bad debt estimation. B. Change the figure for the uncollectible percentage. C. Under the balance sheet aging method, change the past-due categories. D. Change the dates of common stock issuance.
Why is it important to check if debt is decreasing if we have decline in interest expense in financial statement?
Define “financial frictions” in your own terms andexplain why an increase in financial frictions is a keyelement in financial crises.
Which of the following does not relate to credit risks? Select one: A. Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations B. Credit risk also describes the risk that an insurance company will be able to pay a claim. C. It refers to the risk that a lender may not receive the owed principal and interest D. Credit risk describes the risk that a bond issuer may fail to make payment when requested E. Credit risk is the possibility of losing a lender takes on due to the possibility of a borrower not paying back a loan
How do creditors assess risk when lending funds to a company? a. By establishing covenants in the borrowing agreement b. By monitoring the borrower’s debt-to-equity ratio c. By checking a prospective borrower’s credit rating before lending to it d. All of the above answers are correct.
What are some different methods that can be used for customer returns/bad debt? which way do you feel most accurately reflects these balances and why?
Which of the following does not relate to credit risks? a. Credit risk is the possibility of losing a lender takes on due to the possibility of a borrower not paying back a loan b. It refers to the risk that a lender may not receive the owed principal and interest c. Credit risk also describes the risk that an insurance company will be able to pay a claim. d. Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations e. Credit risk describes the risk that a bond issuer may fail to make payment when requested
Which method delays recognition of bad debt until the specific customer accounts receivable is identified? A. income statement method B. balance sheet method C. direct write-off method D. allowance method
refers to the possibility that the debtors supported by bank credit are unable or unwilling to repay the debts on time as stipulated in the contract for various reasons, causing losses to the bank. (A) Credit risk (B) Market risk (C) Operational risk (D) Liquidity risk
Which of the following statements is most correct? a. When actual inflation exceeds expected inflation, debtors gain at the expense of creditors because they repay their loans with depreciated currency. b. When expected inflation exceeds actual inflation, debtors gain at the expense of creditors because they repay their loans with depreciated currency. c. When actual inflation exceeds expected inflation, creditors gain at the expense of debtors because they repay their loans with devalued currency. d. When actual inflation exceeds expected inflation, debtors and creditors both lose because they repay their loans with depreciated currency.