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You are analyzing Duff Beer bonds. Currently Duff has a EBIT interest coverage of 2.1 and carries a rating of AAA. The companys leverage ratio

You are analyzing Duff Beer bonds. Currently Duff has a EBIT interest coverage of 2.1 and carries a rating of AAA. The companys leverage ratio is 0.75 and the quick ratio is 0.60.

Industry guidelines for issues rated AAA are as follows:

  • Quick Ratio: 75 to 1.25
  • Leverage ratio: 0.45 to 0.80
  • EBIT interest coverage: 3.5 times

Is Moe a likely candidate for a downgrade? Explain. What action would most likely increase the quick ratio?

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