Question

Which of the following states of financial distress would be considered the most troubling for an investor or creditor?

a. restructuring debt
b. paying an accounts payable after the billing date
c. failing to make a required interest payment on time
d. defaulting on a principal payment on debt

Answer 1

d. defaulting on a principal payment on debt

Step-by-step explanation:

Remember, there is usually a penalty when one (either an investor or creditor) defaults on a payment on debt such as having to paying higher interest rates on the existing debt or even affecting your ability to get needed debt in the future.

It is because of this foreknowledge of the financial distress attached to defaulting, making most investors and creditors try as much as possible to avoid this scenario.