When firms enter into loan agreements with their​ bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. ​ So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts​ (AAP) in 2009. The firm had total current assets of $1,907,570,000 and current liabilities of $1,362,550,000.   a.  What is the​ firm's current​ ratio? b.  If the firm were to expand its investment in inventory and finance the expansion by increasing accounts​ payable, how much could it increase its inventory without reducing the current ratio below 1.2​? c.  If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and​ short-term debt, how much would it have to reduce current assets to accomplish this​ goal

The _____ rate is the lending rate at which the largest and most creditworthy corporations borrow money from banks. annualunsecured     securedprime

Suppose a company is choosing between bank loans and bonds. The interest rate in the bank loan is 3.5%, and an investment bank predicted that the company will pay close to 4% to issue a bond with the same maturity. In addition, fees are estimated to be higher for the bond issuance than for the bank loan. Explain why this company may still decide to issue the bond rather than borrowing through a bank.

The "mark to market" rule     (a) Created an unrealistic picture of the financial health of some banks.     (b) Required banks to recognize in their balance sheet decrease in value of assets as their price declined in the market, instead of waiting until the asset was sold.     (c) Caused the net worth of some banks to decline significantly and making it impossible for the banks to make loans.     (d) All the above.     (e) Only (b) and (c) are true.

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Two depository institutions have composite CAMELS ratings of 1 or 2 and are "well capitalized." Thus, each institution falls into the FDIC Risk Category I deposit insurance assessment scheme. Further, the institutions have the following financial ratios and CAMELS ratings: Use Table 13–11.    Institution A Institution B Tier I leverage ratio (%)   8.80     7.93   Net income before taxes/risk-weighted assets (%)   2.33     1.95   Nonperforming loans and leases/gross assets (%)   0.53     0.68   Other real estate owned/gross assets (%)   0.15     0.45   Brokered deposits/total assets (%)   3.75     1.05   One year asset growth   7.35     4.65                 Loans as a Percentage of Total Assets:             Construction & Development   0.00     0.00   Commercial & Industrial   18.36     11.40   Leases   2.05     1.75   Other Consumer   18.85     18.55   Loans to Foreign Government   0.30     0.30   Real Estate Loans Residual   0.00     0.00…

As the 2008–2009 financial crisis unfolded, one major U.S. bank had a leverage ratio of 50.In Canada, regulators put a ceiling of 20 on bank leverage ratios. Compare the change inasset values that would push the capital in the U.S. bank to zero with the change requiredto eliminate capital in a Canadian bank at the ceiling-leverage ratio. What is the implicationof the differences in maximum leverage ratios for the stability of the banking system?