Question

You are the CFO of a regional manufacturing firm. They need to raise more capital for an expansion project. You have been asked to talk with regional banks to secure a loan. Your firm has a Current Ratio of 1.0, a Quick Ratio of 0.5, and a TIE ratio of 1.3.

Required:
What would you tell the firm's management about your chances of securing a loan with preferentially low interest rates?

Answer 1

(C) tell management that the company has borderline risk and they will likely need to pay an interest level at or slightly above the average interest rate for their region

Step-by-step explanation:

As it can be seen that the quick ratio is lower, the current ratio is average and the times interest ratio is lower. The time interest ratio should be more as if the company earnings is high so it able to cover its interest expense

Therefore the company is in the borderline risk due to which the company has to pay the high interest rate

Hence, the correct option is c.