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.