10.5k views
1 vote
To earn a high rating from the bond rating agencies, a company would want to have:

1) A low times-interest-earned ratio
2) A low debt-to-equity ratio
3) A high quick ratio

User SheerSt
by
8.7k points

1 Answer

4 votes

Final answer:

To achieve a high bond rating, a company should aim for a low debt-to-equity ratio and high quick ratio, which indicate financial stability and the ability to meet short-term obligations, respectively.

Step-by-step explanation:

To earn a high rating from bond rating agencies, a company would want to have several characteristics that indicate good financial health and lower risk to bondholders. One key indicator is a low debt-to-equity ratio, which suggests the company is not overburdened by debt compared to its equity, making it less risky. Another important factor is a high quick ratio, also known as the acid test ratio, which measures the company's ability to meet its short-term obligations with its most liquid assets; a higher ratio means the company is more able to quickly generate cash to cover its debts. Lastly, a company would prefer not to have a low times-interest-earned ratio. This ratio measures how easily a company can pay interest on its debt, and a higher ratio indicates stronger financial health as it denotes the company can comfortably meet its interest payments.

User Cmorrissey
by
8.2k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories