Final answer:
True. A creditor is ultimately concerned with the ability of a firm to generate profits. When a firm has a record of at least earning significant revenues, and better still of earning profits, it can borrow money from banks or issue bonds. Lenders may be willing to offer more favorable loan terms to firms with a record of high profits.
Step-by-step explanation:
True. A creditor is ultimately concerned with the ability of a firm to generate profits.
When a firm has a record of at least earning significant revenues, and better still of earning profits, the firm can make a credible promise to pay interest, and so it becomes possible for the firm to borrow money. Firms have two main borrowing methods: banks and bonds.
If the borrower is a firm with a record of high profits, it is likely to be able to repay the loan, and lenders may be willing to offer more favorable loan terms.