As the accounts payable manager, you have always been able to negotiate low interest rates when you borrow money to purchase capital. If the company’s liabilities have increased from the last time you negotiated a loan, would you expect to qualify for the same low rates?
* As the accounts payable manager, you have always
been able to negotiate low interest rates when you borrow money to purchase capital. If the company’s liabilities have increased from the last time you negotiated a loan, would you expect to qualify for the same low rates?
A: No, as the company’s current ratio would be lower.
B: Yes, as there is no relationship between liability and loan qualifications.
C: Yes, as the company’s current ratio would be higher.
D: No, as your cash on hand is lower if your liabilities increase.
* The CEO of a major restaurant chain, whose sales vary by no more than 1-2 percent per month, recommends that the company operate on a natural business year end. As the president of the company, do you support this decision? Why or why not?
A: No. A fiscal year is usually associated with businesses that experience significant variances in revenue throughout the year.
B: No. A natural business year is usually associated with businesses that experience significant variances in revenue throughout the year.
C: No. Natural business year is used only for merchandising companies, not service businesses.
D: No. Fiscal year is inconsistent with GAAP provisions.
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