Ask Question
13 August, 05:52

You would like to borrow money three years from now to build a new building. In preparation for applying for that loan, you are in the process of developing target ratios for your firm. Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future?

+5
Answers (1)
  1. 13 August, 09:09
    0
    Cash coverage ratio = 2.6; debt-equity ratio = 0.3

    Explanation:

    Properly understood and applied target ratios are vital when making an informed investment in one's firm. Depending on the given case, the cash coverage ratio of 2.6 and dept equity ratio of 0.3 represent the best target ratios. However to show a sufficient ability to pay, the cash coverage ratio should be substantially greater than 1:1. A good debt to equity ratio is around 1 to 1.5. However, the ideal debt to equity ratio will vary depending on the industry because some industries use more debt financing than others.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “You would like to borrow money three years from now to build a new building. In preparation for applying for that loan, you are in the ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers