a.Longer amortization period in the loans. b. Higher interest rates charged for any of the loans. c. A smaller loan

a.Longer amortization period in the loans. b. Higher interest rates charged for any of the loans. c. A smaller loan

Question:

a.Longer amortization period in the loans.b. Higher interest rates charged for any of the loans.c. A smaller loan amount in any of the loans.d. A higher loan amount in any of the loans.
 

Transcribed Image Text:

Using our risk rating and profitability model, compare two scenarios regarding a loan issuanc
Compare the ratios of the two scenarios below:
Debt Service Coverage Ratio
Adjusted EBITDA/Interest
Debt/Equity
Total Liabilities/Tangible Net
Worth
Current Ratio
Scenario
1
1.89
8.85
0.86
1.78
2.03
Scenario
2
5.19
9.09
0.86
1.78
2.03
If the company’s balance sheet is the same for both scenarios, what could have caused the
changes in the ratios for Scenario 2?

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