Question : Scorecard Corp. has a debt-to-equity ratio of 1.00, compared to : 4726

Scorecard Corp. has a debt-to-equity ratio of 1.00, compared to the industry average of 0.80. Its competitor Baker Corp., however, has a debt-to-equity ratio of 1.50. Based on what debt-to-equity ratios imply, which of the following statements is true?

O Baker Corp.'s creditors face lesser risk than the average financial risk in the industry

O Scorecard Corp.'s shareholders expect magnified returns but higher risk as compared to Baker Corp.

O Baker Corp. has greater financial risk as compared to Scorecard Corp. and to the average financial risk in the industry.

O Baker Corp. has higher creditworthiness as compared to Scorecard Corp.

 

Suppose the stock price of Scorecard Corp. falls by 10%. What impact will it have on its market-to-debt ratio if nothing changes in the company's balance sheet?

O The market debt ratio will decrease, reflecting an increase in the financial risk of the company.

O The market debt ratio will decrease, reflecting a decrease in the financial risk of the company.

O The market debt ratio will increase, reflecting an increase in the financial risk of the company.

O The market debt ratio will increase, reflecting a decrease in the financial risk of the company.

 

Data Collected Scorecard Corp. reported the following figures in its (Millions of dollars) annual report. Year 1 $450 EBITDA Based on the information, Scorecard Corp. has the ability Interest payments $45 to cover its fixed financial charges times Principal payments $36 Lease payments $20