Which of the following is correct?

Select one:

A.

A higher Z-score indicates more probability of bankruptcy.

B.

Sales and profitability is negatively associated with credit rating.

C.

Credit rating scores can determine the optimal debt equity ratio.

D.

Lenders can use credit scoring scores to determine borrowers capacity to pay.

Net income before tax of a company is $50,000. This company has interest bearing securities of $40,000 with weighted average interest rate of 8%. The company has $350,000 of ordinary shares, $350,000 of preference shares and $30,000 of reserves. The interest coverage ratio for this company is close to:

Select one:

A.

11.75

B.

16.63

C.

12.5

D.

15.63

Which of the following is not a determinant of industry profitability?

Select one:

A.

Exit barriers in other unrelated industries.

B.

Switching cost.

C.

Bargaining power of customers.

D.

Rivalry among existing firms in the same industry.

In forecasting income statement, which of the following is NOT a step?

Select one:

A.

Determine the future debt of the company.

B.

Estimate profit by completing the actual pro forma statement.

C.

Establish a sales projection.

D.

Estimate production schedule and associated expenses to determine gross profit.